Opinion

OPINION: Some Councillors made passionate pleas for raises. Did they make their case? You tell me.

Published

4 months ago

November 27, 2018

Garfield Marks

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The opinions expressed in this article are solely those of the writer and should not be interpreted as reflecting the editorial policy of Todayville, Inc.

The city of Red Deer just went through a sad episode in municipal politics. March 2017 the federal government announced the end of a subsidy for politicians, for January 1 2019. Til now politicians did not have to pay taxes on 1/3 of their earnings. Which could add up over time.
Rather than discuss it in advance, determine a proper way to deal with the end of a subsidy or determine a proper compensation package for the mayor and city councillors, they waited til the 11th hour, after they have been elected or re-elected, as in the majority of cases.
One councillor talked about working 10 hours a day everyday of the year, so he deserves a raise to $68,618.16 /yr. giving him an earning of $18.80 /hr for his 10 hours a day everyday. Kind of unbelievable that our councillors work 10 hours a day, everyday, with no days off, no holidays, etc.
Another councillor, said we should be grateful to have such great people on council, so grateful that we should give them raises to cover the end of their tax subsidy. Why this council brought us such events as the CFR and the Winter Games but he failed to mention other issues that became famous under his watch.
Red Deer never recovered from the last recession and is experiencing a continued downturn, while neighbouring communities continue to grow following the provincial growth rate of 4% annually.
Remember these stories:
Alberta on track to have worst air quality in Canada
Red Deer has worst pollution in province, while 4 other regions close to exceeding national standards

Alberta Environment Minister Shannon Phillips says the province is on track to have the worst air quality in Canada, and vows the government will put measures in place to reduce emissions from industry and vehicles.
“The time to act is long overdue,” Phillips said.
“We have a responsibility to do everything we can to protect the health of Albertans.”
Phillips made the remarks after seeing the results of the Canadian Ambient Air Quality Standards report, which show the Red Deer region has exceeded national standards. Four other regions — Lower Athabasca, Upper Athabasca, North Saskatchewan and South Saskatchewan — are close to exceeding national standards.
Phillips said there is no immediate health risk for people living in central Alberta.
“These results are concerning,” Phillips said in a news release. “We can’t keep going down the same path and expecting a different result. Our government has a responsibility to protect the health of Albertans by ensuring air pollution from all sources is addressed.”
The province will initiate an “action plan” to deal with poor air quality in the Red Deer area, a move she said is required under the Canadian Ambient Air Quality Standards.

Red Deer has one of the highest crime rate in the country
According to the local newspaper, The Red Deer Advocate, our fine city has some serious crime issues, compared to other major cities in Alberta. Following are sections of the story:
“Red Deer’s Crime Severity Index (CSI) is higher than Alberta’s other four major cities, recently released Statistics Canada information reveals.”
“The Crime Severity Index measures the volume and severity of crimes reported to police and is standardized, using the number 100 as the base, for the year 2006. It is calculated using all Criminal Code violations including offences like stolen vehicles, traffic and drug violations, and federal statutes”
“According to Statistics Canada, the overall CSI for 2015 for Red Deer is 182 (numbers have been rounded off).”
“This compares with Edmonton at 112, Lethbridge at 109, and Calgary and Medicine Hat both at 77. Alberta’s CSI is 102 and Canada overall is 70.”
“When looking specifically at violent crime, Statistics Canada shows that index for Red Deer up by almost 24 per cent (146 in 2015 from 118 in 2014). It had actually declined each year from 2012 to 2014, before increasing. There were no homicides in 2014. There were two in 2015.”

Red Deer’s population peaked in 2015 and declined in 2016

City council will be talking about growth and managing it. Let us look at the growth during the last mandate 2013-2017. The last census was done in 2016 and showed a decrease since 2015. (99,832 from 100,807) The decision was made to cancel the 2017 census since there was no sign of growth and you needed growth to justify the cost of the census.
Population of Red Deer in 2016 was 99,832 a increase of 2,723 or 2.8%over 97,109 in 2013. Not that great on the face of things, but looking deeper and you realize some neighbourhoods did not even fare that well.
For example;
Kentwood 2016=4,267 2013=4,280
Glendale 2016=4,288 2013=4,393
Normandeau 2016=3,530 2013=3,565
Pines 2016=1,718 2013=1,823
Highland Green 2016=3,920 2013=3,979
Oriole Park 2016=5,244 2013=5,308
Riverside Meadows 2016=3,686 2013=3,665
Fairview 2016=710 2013=770
Johnstone Park 2016=3,865 2013=3760
Total 2016=31,228 2013=31,543
Percentage of population 2016=31.3% 2013= 32.5%
Red Deer City Population 2016=99,832 2013=97,109

In case you did not know these are the neighbourhoods north of the river. So while the city grew for 3 of 4 years in the end it still grew over 4 years ago. The city shrank in total from 100,807 in 2015 to 99,832 in 2016. These neighbourhoods, except for Johnstone Park which grew by 105 and Riverside Meadows which grew by 21, shrank in size over the four years.

So I ask the incumbents to offer measures to stem the outward migration and encourage growth. Anyone? Perhaps build a north side Collicutt Centre? A high school?
The facts are there on reddeer.ca for anyone to study.
Did they make their case. Are they the saviours of Red Deer or not?

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Opinion

Budget 2019 – Poor wording requires 2 ex-spouses within 5 years for Home Buyers Plan

Published

4 days ago

March 20, 2019

Cory G. Litzenberger

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This is one of those rare times I hope I am wrong in my interpretation, and look forward to being proven wrong by my professional colleagues.

On March 19, 2019 the federal government tabled its election-year budget. One of the newest and strangest provisions is the ability for people going through a separation or divorce to potentially have access to their RRSP under the Home Buyers Plan.

Now in my article and podcast entitled: “Escape Room – The NEW Small Business Tax Game – Family Edition” with respect to the Tax On Split Income (TOSI) rules, I made a tongue in cheek argument that people will be better off if they split, because then the TOSI rules won’t apply.

In keeping with the divorce theme, beginning in the year of hindsight, 2020, the federal government is giving you an incentive to split up and get your own place.

However, there are a few hoops:

On page 402 of the budget, under new paragraph 146.01(2.1)(a), at the time of your RRSP withdrawal under the Home Buyers Plan, you must make sure that:

– the home you are buying is not the current home you are living in and you are disposing of the interest in the current home within two years; or
– you are buying out your former spouse in your current home; and

you need to:

be living separate and apart from your spouse or common-law partner;
have been living separate and apart for a period of at least 90 days (markdown October 3, 2019 on the calendar),
began living separate and apart from your spouse or common-law partner, this year, or any time in the previous 4 years (ok, you don’t have to wait for October); and…

…here is where the tabled proposed legislation gets messy.

Proposed subparagraph 146.01(2.1)(a)(ii) refers to where the individual

wouldn’t be entitled to the home buyers plan because of living with a previous spouse in the past 4 years that isn’t the current spouse they are separating from

“(ii) in the absence of this subsection, the individual would not have a regular eligible amount because of the application of paragraph (f) of that definition in respect of a spouse or common-law partner other than the spouse referred to in clauses (i)(A) to (C), and…”

The problem with the wording of this provision, is that it is written in the affirmative by the legislators using the word “and”. This means, you must be able to answer “true” to all the tests for the entire paragraph to apply.

The way I read this, the only way to answer “true” to this subparagraph is if you have a second spouse (ie: spouse other than the spouse referred to) that you shared a home with and you split from in the past four years.

If you have a second spouse that you shared a home with in the past four years, then “paragraph (f)” in the definition of “regular eligible amount” would apply and the answer would be “true”.

If the answer is “true” you can then get access to your RRSP Home Buyers Plan.

If you don’t have a second spouse then, even though “paragraph (f)” might be met, the phrase “spouse other than the spouse referred to” would not be met, and therefore the answer would be “false”.

This would, in turn, cause the entire logic test of the provision to be “false” and so you would not be able to take out a “regular eligible amount” from your RRSP for the Home Buyers plan because you do not meet the provisions.

If my interpretation is correct then I would really be curious as to what part of the economy they are trying to stimulate.

In my opinion the legislation could be fixed with a simple edit:

“(ii) in the absence of this subsection, the individual would not have a regular eligible amount because of the application of paragraph (f) of that definition in respect of:

(A) a spouse or common-law partner; or

(B) a spouse or common-law partner other than the spouse referred to in clauses (i)(A) to (C); and…”

—
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

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Opinion

Budget 2019 – Don’t spend your new Canada Training Credit just yet

Published

4 days ago

March 20, 2019

Cory G. Litzenberger

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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?

No.

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.

In Conclusion

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.