Budget 2010: An advisor wish list

As a warm up to the federal 2010 budget, we asked advisors what their dream budget would look like. And they sure spoke up. Here’s a wish list of things they think would make their jobs easier and their clients happier.

James Hymas, president, Hymas Investment Management Inc.

• A clear-cut plan for a balanced budget through the cycle.

• I want to see statements of planned spending cuts and tax increases that will not just eliminate the deficit (a childish half-measure), but ensure – insofar as such things can be ensured – that surpluses built up in relatively good times will pay for this recession and put us in a good position to cope with the next one.

John Nicola, CEO and Chairman, Nicola Wealth Management

• Continued commitment to keeping corporate tax rates in Canada the lowest in the G7, and using this as a way to attract even more companies to establish themselves in Canada.

• A credible plan for eliminating the current deficit.

• If taxes have to rise, it would be better to have an increase in the GST than increases in income tax.

• Increase statutory limits for both RRSPs and pension plans for retirement savings and consider making some level of retirement savings mandatory.

• Formally acknowledge the need to allow for public and private funding of health care in Canada.

Carol E. Bezaire, VP, tax and estate planning, Mackenzie Financial Corporation

• An extension of the Home Renovation Tax Credit. We need the stimulus in the economy and it won’t be coming from jobs.

• An enhanced donation credit for charitable donations. This is an issue the charity sector has been pushing for. In light of expected cutbacks, it would be nice to see the 29% Federal Tax Credit for donations over $200 increased. Suggested level would be to 39% for donations amounts that are more than the previous years’ donation amount.

• The federal government is also concerned about Canadian savings rates dropping. I would like to see an increase in the contribution levels of the Tax-Free Savings Account, as I think the $5,000 per year limit is too low for people to really pay attention to, based on the fact that only about 39% of Canadians have paid attention to the TFSA.

Jamie Golombek, managing director, tax and estate planning, CIBC Wealth Management in Toronto

• Lower the age for the pension income credit and pension splitting from a RRIF from 65 years from 55 years.

• Provide a dividend tax credit for dividends paid into pension plans, RRSPs and RRIFs.

• Eliminate the low donation credit rate of 15% for cumulative donations made below $200 and replace it with a uniform credit rate of 29% for all donations.

Chuck Grace, consultant, Fusion Consulting in London, Ont.

• Increase the annual TSFA amount to $7,500 – Canadians aren’t saving enough and by the time they figure that out it’s going to place huge pressure on the social infrastructures.

• Tighten up CMHC’s mortgage lending criteria – Canadians also have too much debt, and with low interest rates, they’ve become addicted to credit. Tightening up the lending criteria may help wean us off the “low hanging fruit.”

• A national regulator – its time for Canada to put on its ‘grown-up’ pants. With corporate pension plans evaporating, too much debt and too little savings, Canadians are going to need a healthy, stable financial planning industry. Instead, the planning firms are consumed by regulatory micromanagement leaving little time to focus on the big rocks.

Cindy David, president, estate planning advisor, Cindy David Financial Group Ltd.

• In my perfect world TFSAs would have a higher contribution room.

Bruce Cumming, president, Cumming & Cumming Wealth Management

• My big wish is to see CDIC coverage increased from $100,000 to $250,000.

Tina Tehranchian, branch manager and financial advisor, Assante Capital Management Ltd.

• Tax changes that would encourage contributions to retirement savings plans, such as increasing the RRSP contribution limit.

• Determining contributions to retirement savings plans on a life-time average basis.

• An increase in the age limit for contributions to retirement savings plans. My clients are mostly business owners and professionals and many of them tend to work well into their 70s. Therefore, being able to contribute to their RRSPs beyond age 71 makes a lot of sense for most of them. In addition, life expectancy is increasing and with improvements to healthcare, many people may decide to work well into their 70s. Also, according to Advocis, “only one third of Canadian householdsare currently saving at levels that will generate sufficient income to cover their non-discretionary expenses at retirement.” Therefore, any incentive in this regard would go a long way.

Doug Carroll, VP of tax and estate planning, Invesco Trimark Ltd.

• Frankly with the steady flow of comments from Department of Finance, it doesn’t seem like we’ll be seeing much of significance in this budget. That said, the Renovation Tax Credit seems to have been a real hit last year, so maybe they have something else that might be similarly interesting up their sleeve.

• I’d pretty much align with the issues raised by IFIC in their letter to the Finance committee last August, though I’d focus on these: Pension income-splitting for RRSPs at same ages as for RPPs; Reduce RRIF minimum withdrawal factors; and Eliminate dividend gross-up causing clawback of OAS & GIS.

• If I had to choose among these, I would go for the reduction of RRIF minimum withdrawals. The rates have not changed in almost 20 years, and those in turn are based on actuarial data from about 25 years ago. They don’t distinguish between males and females or inherent health (and related longevity) factors such as smoking. If you’re a non-smoking female then statistically you’re likely to live seven years longer than a male smoker, and yet all are subject to these androgynous minimum withdrawal tables. Of course it’s not practical to start making those distinctions among people, so I would even the playing field by eliminating RRIF minimum withdrawals altogether. In effect, this could lead to the elimination of the distinction between RRSP for build-up and RRIF for drawdown.

• If I really put my wishing hat on, I’d love to eventually see some kind of a re-deposit credit for withdrawals from RRSPs/RRIFs, like there is for TFSAs. This could get a bit dicey if it makes people believe they can dip into their retirement savings too easily, so it would have to be carefully crafted, perhaps with a minimum age aspect.

• It would be nice to see more room made available for TFSAs eventually, but it will likely be a few years before they start tweaking this. Some have suggested that those over 18 get retroactive room for those years. While I don’t think this will happen, perhaps there could be a mechanism to allow people to make some direct transfer from an RRSP/RRIF to a TFSA in excess of current TFSA contribution room. Tax would have to be payable on the RRSP/RRIF realization, but this could present some interesting opportunities, particularly for those at lower brackets.

John De Goey, VP, Burgeonvest Bick Securities Limited (BBSL) Predictions:

• Maximum RRSP contribution might go up to $23,000 for 2011 (still 18% of earned income, though).

• No change for TFSAs.

• No change in marginal tax rates, other than perhaps a small inflationadjustment.

• Annual Deficit of over $40 billio.

• Mandatory RRIF conversion age will go down (to 69 or 70) soon – maybe not this budget, though.

Wish list:

• Reduce personal income taxes and put GST back to 7% – this should be done on a revenue neutral basis.

• Introduce a meaningful carbon tax (fat chance!).

David Wm. Brown, partner at Al G. Brown and Associates in Toronto

• A 10-day expense paid trip to some warm destination for the columnists and editors would be nice.

We hope Mr. Flaherty gets this memo – especially the last one – before he heads over to the House of Commons in his brand new shoes.

(03/03/10)