…or purse, I suppose, if you’re a woman. Or European. Whatever. While much of the media coverage of yesterday’s Federal Budget has focused on the economic stimulus initiatives and the political wrangling in Ottawa, self-centred Canadians such as myself are wondering exactly what impact the impact will be on our personal finances. Sure, new bridges and debts to pass along to our grandchildren are fine and dandy, but my real concern is this- will Budget 2009 help me get a new LCD television?
The answer? Not unless Future Shop is having one hell of a sale.
The Budget promises tax relief for low- to middle-income Canadians (whatever that means), and claims that these cuts will help stimulate spending. The tax measures being introduced take the form of changes to the federal tax brackets but increasing the top limit for the basic personal exemption (the amount you can make before paying any taxes) and for the two lowest brackets (15% and 22%). In other words, the amount you can make before entering the next bracket goes up, meaning your tax bill will go down.
The numbers presented in Budget 2009 look like this:
|Basic Personal Exemption||$9,600||$10,320||$720||$108|
|15% tax bracket||$37,885||$40,726||$2,841||$199|
|22% tax bracket||$75,769||$81,452||$5,683||$227|
Not bad, but not enough to make me rush out and buy that Porsche I’ve had my eye on. However, these numbers are a little deceiving- while someone making more than $81,452 will see the maximum savings of $534 over their 2008 tax bill, the basic personal exemption and tax brackets had already been slated to creep upwards (as they do most years). When we compare the Budget 2009 plan to the already slated changes for 2009, we see the actual savings are even less:
|Item||2009 (proposed)||2009 (revised)||Variance||Savings|
|Basic Personal Exemption||$10,100||$10,320||$220||$33|
|15% tax bracket||$38,832||$40,726||$1,894||$133|
|22% tax bracket||$77,664||$81,452||$3,788||$152|
Obviously, for those making less than $81,000, the savings will be even less and not on a proportional basis, as the savings don’t kick in until you reach the top of your bracket. An individual earning $60,000 will save $166, and a couple earning $30,000 each will save a total of $66 between them. Not exactly a spending stimulus, but we’ll take what we can get.
There are also a number of other initiatives that may be of value to some- as promised during the last election campaign there will be a tax credit on closing costs for first time home buyers, which could have an ultimate value of up to $750, and there are some changes to benefits for low income seniors. I’m also quite intrigued by the tax credit for certain home renovations that could be worth up to $1,350 if you spend over $10,000. I’m holding judgment on this measure, though- the value of such a program will depend on what exactly is eligible and what strings are attached. I’m particularly interested to see if labour costs will be an eligible expense (for those silk hanky, white shoe, latte sipping types who don’t do their own work), and if so what impact that will have on the number of contractors willing to give that infamous “cash discount”. I can’t help but think that offering tax credits for renovations may pay for itself in increased reported income from contractors. Either way, I’m going to make sure I keep all my receipts from Home Depot, not just the ones I show my wife.
So for our family, Budget 2009 will save us a bit more than $600 in taxes over what we otherwise would have paid in 2009- not quite enough for a new TV, but getting there. If I can write off some of my renovation expenses we’ll be a little bit closer, but probably still not enough. Prime Minister Harper, you’ve failed to stimulate me. Coalition, do your worst!