Budget 2019 – Don’t spend your new Canada Training Credit just yet
On March 19, 2019, the federal government tabled its election-year budget. One of the new provisions is a refundable credit called the Canada Training Credit. However, the $250 credit won’t even be available until you file your 2020 income tax return in April of 2021.
Further, if you are born in 1995 or later, you won’t qualify yet. If you were born in 1954 or earlier, you would never be eligible.
In addition, the maximum benefit you can receive is $5,000 in a lifetime (which will take 20 years to get at $250 a year) and the benefit can only be used to a maximum of 50% of eligible tuition costs.
So let’s consider the following scenario:
It is 2019 – you are 25 years of age making $27,000 a year and file your taxes every year.
You decide to take advantage of this credit and enroll in your first semester of schooling in the fall of 2023.
According to Statistics Canada, the average Canadian undergraduate pays $3,419 per semester.
So, you take time off work to go to school full-time in the fall, thus reducing your income by 1/3 in the year to $18,000.
Under the current 2019 rules, you would only have $39 in federal income tax. This amount is low because the tuition credits reduce your taxes.
By 2023, you have built up a “pool” of $250 per year after you turned 26, and believe you have a $1,000 pool available for that year.
When you file your 2023 return the $1,000 is triggered as a refundable tax credit. But you won’t be getting $961 back ($1,000 – 39).
Here’s the catch:
The $1,000 pool reduces the amount you can claim for tuition credits as well, which changes the tax owing to $189 Federal income tax. Meaning the $1,000 pool that you waited for is reduced by 15% by the time you pay it out.
Cash in jeans: $811.
But what if the course you decided to go into begins in January of 2023? You go for the January-April semester, work from May-August, and attend school September-December.
Using the same $27,000 – your income is now reduced by 2/3 while attending full time. Your income is only $9,000 as a result of the May-August period.
Your tuition (possibly paid through student loans) is $6,838 for the year.
Your tax is now zero because even before tuition credits you are below the Basic Personal Amount in your earnings.
Does this mean you get the full $1,000?
Because your income is less than $10,000 in 2023, you don’t get the $250 for that year. As such, you only get $750, and your tuition credits available for carryforward are reduced by $750 as well, thus having a future negative impact on tax of $112.50.
Net result: $637.50 cash in jeans
What if you are a parent that decides to stay home with the kids until they are in school full time and go back to school in 2023?
Unfortunately, because you did not make more than $10,000 a year in any of the years, you get zero.
What if you were laid off, collecting regular EI benefits, and decide to go back to school?
Regular EI Benefits don’t qualify for the $10,000 income calculation. As a result, unless you had special EI benefits like parental leave or earned income from another source greater than $10,000, you don’t qualify.
What if you were self-employed through a small business corporation and paid yourself dividends instead of wages and then decided to upgrade your training?
Your dividend income does not qualify, and so you are not eligible for amounts to be added to the pool.
So assuming you qualify, and you wait the four years to build up a pool of $1,000 (remember that the $1,000 is only a net $850 because of the reduction in tuition credits). That same Statistics Canada report says that tuition is increasing at 3.3% per year. That means by you waiting four years so you can get the Net $850 means your annual tuition has likely increased from $6,838 to $7,786 ($948).
You waited four years, and the tax amount you receive won’t even cover the inflationary price increase on tuition.
- Those that do qualify won’t see anything until April 2021; the actual net amount of what they will see is only $212.50; and their annual tuition will likely have increased by $225.65.
- Students under the age of 25 will see nothing;
- People over the age of 25 that don’t have more than $10,000 of income will see nothing;
- Seniors will see nothing;
- Parents looking to re-enter the workforce will see nothing; and
- People who have been laid off and have less than $10,000 of non-EI income will see nothing.
Seems like a lot of complex legislation for nothing.
Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr is the President & Founder of CGL Strategic Business & Tax Advisors; you can find out more about Cory’s biography at http://www.CGLtax.ca/Litzenberger-Cory.html
Could be a long day tonight — Cam needs coffee
The Best Life Lesson for a Teen Is a Job
From the Brownstone Institute
During the Covid debacle, kids were locked out of school or otherwise condemned to an inferior Zoom education for up to two years. What were the alternatives? Unfortunately, since the New Deal, the federal government has severely restricted teenagers’ opportunities for gainful employment. But new evidence proves that keeping kids out of work doesn’t keep them out of mental health trouble.
Yet suggesting that kids take a job has become controversial in recent years. It is easy to find expert lists on the dangers of teenage employment. Evolve Treatment Center, a California therapy chain for teenagers, recently listed the possible “cons” of work:
- Jobs can add stress to a child’s life.
- Jobs can expose kids to people and situations they might not be ready for.
- A teen working a job might feel like childhood is ending too soon.
But stress is a natural part of life. Dealing with strange characters or ornery bosses can speedily teach kids far more than they learn from a droning public school teacher. And the sooner childhood ends, the sooner young adults can experience independence – one of the great propellants of personal growth.
When I came of age in the 1970s, nothing was more natural than seeking to earn a few bucks after school or during the summer. I was terminally bored in high school and jobs provided one of the few legal stimulants I found in those years.
Thanks to federal labor law, I was effectively banned from non-agricultural work before I turned 16. For two summers, I worked at a peach orchard five days a week, almost ten hours a day, pocketing $1.40 an hour and all the peach fuzz I took home on my neck and arms. Plus, there was no entertainment surcharge for the snakes I encountered in trees while a heavy metal bucket of peaches swung from my neck.
Actually, that gig was good preparation for my journalism career since I was always being cussed by the foreman. He was a retired 20-year Army drill sergeant who was always snarling, always smoking, and always coughing. The foreman never explained how to do a task since he preferred vehemently cussing you afterwards for doing it wrong. “What-da-hell’s-wrong-with-you-Red?” quickly became his standard refrain.
No one who worked in that orchard was ever voted “Most Likely to Succeed.” But one co-worker provided me with a lifetime of philosophical inspiration, more or less. Albert, a lean 35-year-old who always greased his black hair straight back, had survived plenty of whiskey-induced crashes on life’s roller coaster.
Back in those days, young folks were browbeaten to think positively about institutions that domineered their lives (such as military conscription). Albert was a novelty in my experience: a good-natured person who perpetually scoffed. Albert’s reaction to almost everything in life consisted of two phrases: “That really burns my ass!” or “No Shit!”
After I turned 16, I worked one summer with the Virginia Highway Department. As a flag man, I held up traffic while highway employees idled away the hours. On hot days in the back part of the county, drivers sometimes tossed me a cold beer as they passed by. Nowadays, such acts of mercy might spark an indictment. The best part of the job was wielding a chainsaw—another experience that came in handy for my future career.
I did “roadkill ride-alongs” with Bud, an amiable, jelly-bellied truck driver who was always chewing the cheapest, nastiest ceegar ever made—Swisher Sweets. The cigars I smoked cost a nickel more than Bud’s, but I tried not to put on airs around him.
We were supposed to dig a hole to bury any dead animal along the road. This could take half an hour or longer. Bud’s approach was more efficient. We would get our shovels firmly under the animal—wait until no cars were passing by—and then heave the carcass into the bushes. It was important not to let the job crowd the time available for smoking.
I was assigned to a crew that might have been the biggest slackers south of the Potomac and east of the Alleghenies. Working slowly to slipshod standards was their code of honor. Anyone who worked harder was viewed as a nuisance, if not a menace.
The most important thing I learned from that crew was how not to shovel. Any Yuk-a-Puk can grunt and heave material from Spot A to Spot B. It takes practice and savvy to turn a mule-like activity into an art.
To not shovel right, the shovel handle should rest above the belt buckle while one leans slightly forward. It’s important not to have both hands in your pockets while leaning, since that could prevent onlookers from recognizing “Work-in-Progress.” The key is to appear to be studiously calculating where your next burst of effort will provide maximum returns for the task.
One of this crew’s tasks that summer was to build a new road. The assistant crew foreman was indignant: “Why does the state government have us do this? Private businesses could build the road much more efficiently, and cheaper, too.” I was puzzled by his comment, but by the end of the summer I heartily agreed. The Highway Department could not competently organize anything more complex than painting stripes in the middle of a road. Even the placement of highway direction signs was routinely botched.
While I easily acclimated to government work lethargy, I was pure hustle on Friday nights unloading trucks full of boxes of old books at a local bindery. That gig paid a flat rate, in cash, that usually worked out to double or triple the Highway Department wage.
The goal with the Highway Department was to conserve energy, while the goal at the book bindery was to conserve time—to finish as quickly as possible and move on to weekend mischief. With government work, time routinely acquired a negative value—something to be killed.
The key thing kids must learn from their first jobs is to produce enough value that someone will voluntarily pay them a wage. I worked plenty of jobs in my teen years – baling hay, cutting lawns, and hustling on construction sites. I knew I’d need to pay my own way in life and those jobs got me in the habit of saving early and often.
But according to today’s conventional wisdom, teenagers should not be put at risk in any situation where they might harm themselves. The enemies of teenage employment rarely admit how the government’s “fixes” routinely do more harm than good. My experience with the highway department helped me quickly recognize the perils of government employment and training programs.
Those programs have been spectacularly failing for more than half a century. In 1969, the General Accounting Office (GAO) condemned federal summer jobs programs because youth “regressed in their conception of what should reasonably be required in return for wages paid.”
In 1979, GAO reported that the vast majority of urban teens in the program “were exposed to a worksite where good work habits were not learned or reinforced, or realistic ideas on expectations in the real world of work were not fostered.” In 1980, Vice President Mondale’s Task Force on Youth Unemployment reported, “Private employment experience is deemed far more attractive to prospective employers than public work” because of the bad habits and attitudes spurred by government programs.
“Make work” and “fake work” are a grave disservice to young people. But the same problems permeated programs in the Obama era. In Boston, federally-subsidized summer job workers donned puppets to greet visitors to an aquarium. In Laurel, Maryland, “Mayor’s Summer Jobs” participants put in time serving as a “building escort.” In Washington, D.C., kids were paid to diddle with “schoolyard butterfly habitats” and littered the streets with leaflets about the Green Summer Job Corps. In Florida, subsidized summer job participants “practiced firm handshakes to ensure that employers quickly understand their serious intent to work,” the Orlando Sentinel reported. And folks wonder why so many young people cannot comprehend the meaning of “work.”
Cosseting kids has been a jobs program for social workers but a disaster for the supposed beneficiaries. Teen labor force participation (for ages 16 to 19) declined from 58 percent in 1979 to 42 percent in 2004 and roughly 35 percent in 2018. It’s not like, instead of finding a job, kids stay home and read Shakespeare, master Algebra, or learn to code.
As teens became less engaged in society via work, mental health problems became far more prevalent. The Centers for Disease Control and Prevention found that in “the 10 years leading up to the pandemic, feelings of persistent sadness and hopelessness—as well as suicidal thoughts and behaviors—increased by about 40 percent among young people.”
The troubled teen years are producing dark harvests on campus. Between 2008 and 2019, the number of undergraduate students diagnosed with anxiety increased by 134 percent, 106 percent for depression, 57 percent for bipolar disorder, 72 percent for ADHD, 67 percent for schizophrenia, and 100 percent for anorexia, according to the National College Health Assessment.
Those rates are much worse post-pandemic. As psychiatrist Thomas Szasz observed, “The greatest analgesic, soporific, stimulant, tranquilizer, narcotic, and to some extent even antibiotic – in short, the closest thing to a genuine panacea – known to medical science is work.”
Those who fret about the dangers that teens face on the job need to recognize the “opportunity cost” of young adults perpetuating their childhood and their dependence. Sure, there are perils in the workplace. But as Thoreau wisely observed, “A man sits as many risks as he runs.”
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