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Author: deslandesy One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1193  
Subject: Fed up with 20% FC in RRSP? Date: 11/9/1999 12:28 AM
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To all Canadian Fools with a RRSP,

Aren't you fed up with this "20% Foreign Content" rule? Why are we allowed to invest only a small fraction of our money in companies like MSFT, INTC, MCD, IBM, Goodyear, Wallmart, J&J, Pfizer, Merck, etc who all do great business in Canada. They sell, manufacture, trade, invest, build facilities and provide work to many Canadians in Canada. Why is investing in them limited inside a RRSP, but legal outside of it? Double standard?

And why is Mr. Martin trying to limit the ways available to me to maximise my RRSP? The better I do, the more tax I will eventually pay when I start withdrawing! More taxes!.... that usually excite a Minister of finance.... and any politician by the way! By eliminating this "unfair" rule, Mr. Martin would change a "lose-lose" into a "win-win" situation. Presently, this rule is very unfair!

I think something has to be done here. I have E-mailed Mr. Martin directly, with a CC to my MP about this issue, suggesting to eliminate it entirely in his next budget. And not simply increasing the percentage allowed!.... I do not want 25% or 33% or even 50%..(except maybe during a transition period). I would like 100% of stocks of companies that do business in Canada and are traded on Canadian, American and legitimate Worlwide stock exchanges... Nothing less.

If you support this and are interested in also making yourself heard , let me know and I will post what I sent and the URL of the site where you can get the E-mail address of your MP. Hopefully, some of you will agree and write to him as well. The more vocal we are, the more likely things will change! It certainly does not cost very much to try!

Thanks

Yves
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Author: mukluk Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 62 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/9/1999 8:06 AM
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If you support this and are interested in also making yourself heard , let me know and I will post what I sent and the URL of the site where you can get the E-mail address of your MP.

Yves,

Yes, please post the information. I, for one, have also been frustrated by the 20% rule.

Mo.

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Author: FrozenCanuck Big red star, 1000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 63 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/9/1999 8:27 AM
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Yves,

GREAT initiative, and YES PLEASE post the info (Paul Martin's email and how to find my MP's email).

We can all lobby him over the internet and have this rule removed. Worth a shot. I know they have been "thinking about it"

Chris.



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Author: deslandesy One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 64 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/9/1999 9:15 AM
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Well, since there is interest, you can find the E-mail of your MP at

http://www.canoe.ca/CNEWSPolitics/mplist.html

For Paul martin I found two addresses and I used both:
pmartin@fin.gc.ca and MartiP@parl.gc.ca

Here is the message I sent. Feel free to use whatever part you want, to write your own message. My English is not that great, so it sure needs some "wordsmithing", but I think that it carries the message. Thanks to all of you who are interested in supporting this.

Yves

>>Dear Mr. Martin,

I would like to raise the issue of the Foreign content in Canadian RRSP's. I consider that the current limitation (20% or less) constitutes an extremely unfair treatment to Canadian citizen, who are trying to save enough money for their retirement. I find it totally unacceptable that, on one hand you give me a chance to build a decent retirement (by postponing the payment of taxes on monies in the RRSP) but attach a huge bullet to my leg by limiting me on the quantity of certain stocks I can hold in this RRSP.

1. Why is it that I cannot profit, within my RRSP, from investing without restrictions, in all companies that are legitimitely allowed to do business in Canada? Investing in companies such as Microsoft (we all use their software in Canada), IBM (who actually have an extensive presence in Canada, e.g. in Bromont, Burnaby and Markham), SUNW (that is the internet!), AOL (they have hundred of thousands of customers in Canada), McDonald (I am sure that you know them), DIS (they make movies that are playing all the times in cinemas in Canada), Wall-Mart and Home-Depot (They are established in my town and I shop there regularly), SONY and other recording companies (I know Celine Dion and Shenaia Twain CD's ring a bell), Proctor and Gamble, American Express (you have one of their card I am sure!), Merck, Pfizer, Kodak, Goodyear, Hewlett-Packard, Johnson&Johnson, etc, etc....... These companies sell, manufacture, trade, invest, build facilities and provide work to many Canadians in Canada. I spend a large part of my money to purchase these products!... These companies are "global" (you have heard of the term globalization I'm sure!).... And aren't we suppose to have free trade with the US and Mexico? Why these barriers... nobody wins here!...


2. Why are you trying to limit the ways available to me to grow my RRSP? Since, sooner or later, I will pay taxes on these gains (and actually at a tax rate that will be higher than the same gains made outside a RRSP!), don't you want me to prosper as much as I can? Do you realize that if I prosper, the Government (and the citizen of Canada) will eventually also benefit from these taxes when we start withdrawing the money!.... That would be something called a "win-win" situation! Why don't you stop immediately this "lose-lose" condition! SVP, Mr Martin, do something. This situation is insane.

Recommendations:

Please amend the law so that 100% (no limitations whatsoever) of the stocks traded on the Canadian exchanges (TSE, MSE, VSE, ASE), the American exchanges in the USA (NYSE, NASDAQ, AMEX) and the legitimate worlwide exchanges, be fully eligible within a Canadian RRSP for the benefit of all Canadian citizens, and of Canada when these funds are withdrawned and taxes are paid!

Thank you for considering this memo.

PS. And by the way, I suspect that the banks and other institutions that administer these RRSP's will thank you dearly for simplyfing their bureaucracy by removing this rule!

Yves Deslandes<<







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Author: tecmo Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/9/1999 11:28 AM
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Yves, I will play devils advocate here.

Why should the you be allowed to invest more than 20% outside of Canada? Nobody is forcing you to invest inside your RRSP? Investing in Canadian companies helps the Canadian economy and we all benefit. RRSP are a way for the government to encourage investment in Canada.

Suppose the government wanted to encourage investment in farming and such created a FIRP (Farming Investment Retirement Porfolio) and the rules were that you had to invest 90% of the money in Canadian Farms, as an incentive the goverment guaranteed your initial investment. Now does it make sense to argue that the goverment is restricting your investing options by limiting you to farms? Of course not! Governments try to direct capital all of the time, RRSPs are just one way of doing that. If you don't like the rules then don't play the game.

Imagine how much harder it would be for canadian companies to raise captial if there no RRSP restriction? The TSE would probably fall by 30% or more as people rushed to move their investment dollars. When you put your money into the RRSP you knew the restriction was there, don't try to change the rules after the fact!

What the government should really do, is make canadian companies more competive so that investing in them can be more profitable. I think that high taxes are the number one problem facing canadian companies (esp High Tech).

brant
...


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Author: palsan Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 66 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/9/1999 1:03 PM
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As much as I hate to admit it, I agree with tecmo's argument in favour of keeping the current rules.

Whether or not one agrees with the (potential) benefits, governments always distort the operation of the free market by the actions they take. By imposing the 20% foreign content rule, the government is saying that it wants Canadians to invest in Canadian companies in their RRSP's - this distorts the free market but it is a public policy decision.

Like it or not the rule does not prevent anyone from
investing in foreign securities.

I've read that the majority of Canadians DO NOT currently have the maximum foreign content in their RRSP's. If the majority are not taking advantage of the current rules what makes anyone think that there is really a great demand to increase the limits.

I would bet that the vast majority of those that do have the max 20% foreign content are "high net worth individuals". These individuals in the highest tax bracket are the only ones that really benefit from RRSPs (check the RRSP board for discussion on this issue). Furthermore, these individuals are the most vocal when it comes to taxation issues. Because they are the most vocal, they get the media attention. Therefore, it seems that everyone wants higher foreign content limits when in fact probably a small minority even know of its existence.

palsan

just playing devils advocate ... I for one do not plan to invest any more money in RRSP so I don't really care about the 20% limit!

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Author: dwhunter One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/9/1999 5:34 PM
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I am kind of in the middle of this issue. I would like to see an increase of the foreign content rule to 35% but I agree that a full elimination of the rule would be disadvantegeous to Canadian business, especially smaller business that might need the help and the time to move from start up to world player. In a vacuum it is very easy to say that the free market will determine the success and failures in an industry. However, in this global economy the Federal Government should provide help to Canadian business because they can be at a competitive disadvantage to their American counterparts. This question has always been around. Should the government legislate this help or should natural selection take over. There was a large uproar when the government came up with the CANCON regulations in the music industry a while back but does anyone now question that without these 'restrictive' regulations we would not have the volume of great Canadian talent that populate the music industry today. Sure, the superstars such as Celine Dion, Sarah McLaughlin and Bryan Adams would have excelled, but would others such as The Hip or Barenaked Ladies have received air time on Canadian Stations anyother way?

Thanks,

Darren

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Author: ThePup One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/9/1999 7:28 PM
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Tecmo and Fools,

<What the government should really do, is make canadian companies more competive
so that investing in them can be more profitable. I think that high taxes are the number
one problem facing canadian companies (esp High Tech).>


Here, here!!!! The petition would still go to Mr. Martin on reducing taxes. There is an online petition to cut taxes in the year 2000 that is put on by the Canadian Taxpayers Federation if anyone is interested.
<http://www.taxpayer.com/>

Not sure if our voice will ever be heard but it is worth a try!

Cheers,

ThePup

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Author: deslandesy One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/9/1999 11:49 PM
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Hey Brant!

That is the reply I was expecting from Paul Martin himself! Have you ever considered running for public office? A joke of course! I appreciate your comments and you certainly make many excellent points.

I realize that I am asking to change the rules of the game. But RRSP have existed for more than 20 years and the rules have changed through these years (maximum contribution has increased, roll over of unused contributions, etc), probably partly because or requests of this type, that, I realize may look "foolish" at the beginning.

Really, the issue comes down to what is the purpose of the RRSP program? Is the government using this to genuinely encourage Canadians to build their retirement, because the resources to support all these baby boomers will be less in the future? Or is it to help the Canadian economy? I suspect that the obvious response would be a combination of both. In what proportion? Hummmm!…. I assume that every Canadian has a different opinion on this. But, I personally see RRSP's primarily as a tool for building retirement. I consider RRSP's similar to the new education plan where you accumulate money for the future education of your children. I think that the main purpose of the education plan is to help Canadians to build enough financial resources to get their children through college because, we all know that the cost of education will increase sooner than later. There may be side effects beneficial to the current Canadian economy in the meantime, but this is not, in my opinion the main reason why the Government set them up. So this is somewhat how I see RRSP's. Maybe I am totally naïve, mistaken and unwise and don't realize that they have actually disguised what is primarily a "National Suppport of the Canadian Economy Plan" into a Registered Retirement Savings Plan!

So, I wish they would change the FC rule. How much of an effect would it have on the TSE? I do not know, but, in my opinion, nothing like the 30% you suggest. Certainly not if it is implemented gradually. Granted that the weakest stocks would suffer most... but …isn't it a jungle out there. In addition, I believe that allowing 100% foreign content would not cause a huge amount of investors to stampede to switch their investments to US stocks. It may not be a good time at all to do this. The Canadian market is badly lagging behind the US. It may well recover and catch up. (Although the task is big. Compare the two curves below since May 1998)

http://www.tscn.com/wsc/TECHNICAL.html?Timespan=520&TSym=.DJI

http://www.tscn.com/wsc/TECHNICAL.html?Timespan=520&TSym=T.TI300&PH=2

Finally, regarding your point about lowering the taxes for companies, you are totally correct. I wish the government would reduce income tax of businesses and stop giving moneys right left and center to unprofitable ones. Just try to imagine the effect of a reduction of 6% income tax on a company that pays 40% tax and would drop to 34%. For $1.00 of earning before taxes (normally yielding $0.60 net earnings) now you would have $0.66 net earning! An increase of 10%! Translate to the TSE that's an increase of 720 points!… The TSE at 8000!…. That would make up some of the time lost! Hummm.... dreaming again!....

Thanks for the comments!

Yves


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Author: tecmo Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/10/1999 1:30 AM
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Yves

Hey Brant!

That is the reply I was expecting from Paul Martin himself! Have you ever considered running for public office? A joke of course! I appreciate your comments and you certainly make many excellent points.


Now in true Political fasion I am going to argue the other side (from a different angle). Currently the 20% FC restriction is a joke, mainly because there is a big loopole. Fund managers are able to circumvent the restriction by using derivative products. Unfortunately this type of strategy is not available to the common investor due to the high fees involved. This creates un uneven playing field that benefits the mutual funds companies and restricts the choices of common investors. So unless the loopole can be closed I think that the 20% FC restriction should be lifted so that all canadians can benefit without lining the pockets of the mutual fund companies. High fees are one of the biggest drags on a retirement portfolio.

brant
...


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Author: palsan Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/10/1999 9:55 AM
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OK, since we're in "tax rage" mode allow me the following rant.

It always amazes me how people want to have their cake and eat it too. On the one hand people argue that the foreign content limit should be eliminated, but I don't hear anyone argue that RRSP contributions should NOT be deductible from income.

To me, a (democratically elected) government made a policy decision:
Taxpayers can get a break by deducting contributions from income, thereby reducing current taxes, and are allowed to deffer taxes until retirement. That's the "carrot" if you will. The "stick" is that in order to participate, the taxpayer is only allowed to have certain investments sheltered from current taxation.

Now we can all argue until we're blue in the face that the rule is unfair, or that it distorts markets, or that the government is limiting a person's retirement savings potential, but at the end of the day, everyone makes a free decision to put money in the RRSP or not.

As far as I'm concerned, given the current rules, the average person is better off investing outside RRSPs anyway. So, the foreign content rules do not "limit" anyone's ability to grow their retirement funds.

Furthermore, the reason we're having the argument about foreign content in the first place, is that over the last few years returns from the US have been MUCH higher than in Canada. This is not likely to continue forever. Eventually, the market returns in Canada will come back in line with those in the US (during given periods Cdn returns will even be higher). At that point I bet that alot of people now wanting to jump on the US bandwagon will regret the decision and wish the 20% restriction had remained in place!

Conclusion, yes, taxes are high in Canada, but it can be argued that the higher taxes are the price we pay for our standard of living and quality of life. Having said that, lets not just argue for higher foreign content limits in RRSPs if we are not prepared to make other fundamental changes to the tax system (ie eliminating the RRSP program altogether).

palsan

ps In tandem with the elimination of RRSPs, capital gains taxes should also be eliminated. That's the best way of creating wealth and thereby increasing one's retirement fund. But thats another rant!

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Author: tecmo Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 72 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/10/1999 11:01 AM
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palsan

Now we can all argue until we're blue in the face that the rule is unfair, or that it distorts markets, or that the government is limiting a person's retirement savings potential, but at the end of the day, everyone makes a free decision to put money in the RRSP or not.


Given this statement, shouldn't people have the choice? How would removal of the RRSP benefit anyone?


ps In tandem with the elimination of RRSPs, capital gains taxes should also be eliminated. That's the best way of creating wealth and thereby increasing one's retirement fund. But thats another rant!


Captial Gains taxes are a tax on investment, investment is what drives the economy and creates jobs. Thus cg taxes are a limiting factor in the growth of our country.

There are 3 main areas that I see a need for tax reform.

1) Reduction of capital gains taxes. They should be reduced to a level of say 15% or so. This would enourage investment.

2) Income Tax Bracket Creep. Right now the top bracket kicks in at $65K. How many people actually consider someone at $65K rich? This is the middle class. I would raise it to $100K immediately and then index it to inflation.

3) Creating a household tax rather than individual tax. Right now if I make $35K and my wife makes $35K we get taxed at a much lower rate than if my wife made $70K and I stayed home with the kids, even though the household income is the same. This is basically reducing the standard of living of families as the first family will be forced into day care (another problem). I propose that as for families with children , the top income earner should be able to transfer up to 25% of their income to the other spouse to cover child card expenses (if they wish).

brant
...


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Author: palsan Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/10/1999 11:36 AM
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tecmo,

How would removal of the RRSP benefit anyone?

Just removing the RRSP would not, on the surface, benefit anyone. However, if cap gains taxes were removed/reduced, the need to shelter investments would also be reduced. Therefore, we would all be better off with lower cap gains taxes, even in the absence of the RRSP.

An argument could be made that, since the average person would be better off investing outside of RRSPs, the main beneficiaries of the program are individuals in the upper tax brackets. Therefore, removing the deductibility of contributions would not "hurt" the average taxpayer (in the long-run).

I agree 100% with your other two points. But then again, since my wife stays at home with the 2 kids, I would stand to benefit if they were implemented :-)

palsan

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Author: mondoFool One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 77 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/10/1999 8:46 PM
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Brant

>>3) Creating a household tax rather than individual tax. Right now if I make $35K and my wife makes $35K we get taxed at a much lower rate than if my wife made $70K and I stayed home with the kids, even though the household income is the same. This is basically reducing the standard of living of families as the first family will be forced into day care (another problem). I propose that as for families with children , the top income earner should be able to transfer up to 25% of their income to the other spouse to cover child card expenses (if they wish).
<<

I agree with this point totally. My wife doesn't work and I don't have kids, so I like the household income thing. But even without that, I think we should give more breaks to families with kids. The gov is always yacking about bringing more immigrants in, because we need a growing population to support our system(I was imported myself; thanks Canada). But the other way of increasing population is to create more kids. Modern societies does not favour more kids and neither does our tax system. Our tax system favours child care over the stay home parent. I think this is ethically wrong.

mondoFool



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Author: FrozenCanuck Big red star, 1000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/11/1999 3:20 PM
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Darren,

Thanks for posting the online petition info. I emailed Paul Martin last night and I filled out the petition a minute ago.

I do not agree with those of you who think eliminating the rule will hurt Canada. If most people don't even use up all their foreign content then why would this change if the law is removed? I don't see that it would for many investors who just buy Canadian mutual funds (not us, hehehehe).

In addition, companies should compete based on their own merrits, not because we are stuck with 80% domestic content.

IN the USA, they have an IRA plan that does not restrict where they invest. Mortgage interest is tax deductible...the list goes on. Canada is simply not competitive. Doesn't work. The gov't must fix this.

Chris.

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Author: FrozenCanuck Big red star, 1000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 81 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/11/1999 3:21 PM
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Sorry - thanks to ThePUP for posting the online petition info.

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Author: FrozenCanuck Big red star, 1000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 82 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/11/1999 3:28 PM
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Palsan - in responce to your comment I will reitterate my other post briefly. In the USA, you can deduct income when you invest in an IRA, and you can also invest wherever you like - no restrictions on foreign content.

Capital gains taxes are also MUCH lower - 20% max if you hold for one year or longer (I think). We have crappy tax rules all over the place. One thinks about moving to the US because of all this.....that's for sure.

Chris.

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Author: FrozenCanuck Big red star, 1000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 83 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/11/1999 3:30 PM
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Brant - I agree with all of your suggestions. TOTALLY true. Especially #3. That one really pisses me off.

1) Reduction of capital gains taxes. They should be reduced to a level of say 15% or so. This would enourage investment.

2) Income Tax Bracket Creep. Right now the top bracket kicks in at $65K. How many people actually consider someone at $65K rich? This is the middle class. I
would raise it to $100K immediately and then index it to inflation.

3) Creating a household tax rather than individual tax. Right now if I make $35K and my wife makes $35K we get taxed at a much lower rate than if my wife made
$70K and I stayed home with the kids, even though the household income is the same. This is basically reducing the standard of living of families as the first family will
be forced into day care (another problem). I propose that as for families with children , the top income earner should be able to transfer up to 25% of their income to
the other spouse to cover child card expenses (if they wish).


Chris.

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Author: Jacko2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 85 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/11/1999 8:00 PM
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Yves:

Right on! Couldn't agree more.

Please e-mail the info: moirlaw@intergate.ca

Don

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Author: polarfool Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 87 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/11/1999 11:24 PM
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3) Creating a household tax rather than individual tax. Right now if I make $35K and my wife makes $35K we get taxed at a much lower rate than if my wife made
$70K and I stayed home with the kids, even though the household income is the same. This is basically reducing the standard of living of families as the first family will
be forced into day care (another problem). I propose that as for families with children , the top income earner should be able to transfer up to 25% of their income to
the other spouse to cover child card expenses (if they wish).


Brant, Chris:

I agree with you both on this one. That is my situation right now. Its a tough job to take care of the kids and home and I think a fair wage is due for the job either through tax credits, etc. for the family as a whole. Secondly, but not least, kids of parents who stay at home have been found to have more success in school at least in the earlier years. Why discourage families from having the option of having one parent stay at home. If kids can potentially be better off, that helps all of society in numerous ways.

If either of you know of a group that is pushing this effort forward please e-mail me directly at let me know.

Ed



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Author: tecmo Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 88 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/12/1999 12:04 AM
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3) Creating a household tax rather than individual tax. Right now if I make $35K and my wife makes $35K we get taxed at a much lower rate than if my wife made $70K and I stayed home with the kids, even though the household income is the same. This is basically reducing the standard of living of families as the first family will be forced into day care (another problem). I propose that as for families with children , the top income earner should be able to transfer up to 25% of their income to the other spouse to cover child card expenses (if they wish).


The daycare crisis is a real problem, I think the reason that so many kids are in daycare is that parents don't have a choice any more. The government has the power to influence people with taxation policy.

As for deducting you mortgage expense, I have to disagree with this. House prices are mainly tied to income level right now. If you allow mortgage interest to be deducted all that you will do is drive up the price of houses so that it is a wash. The only people that will benefit are existing homeowners whereas young people will be left out in the cold as they try even harder to save up that elusive downpayment.

I am seeing a major problem in society right now. Most of my peer group (25-30) is very depressed with their situation. The job market is very limiting even if you have a degree. Most people are entering the workforce at the $25K level and can't make ends meet for even the most basic lifestyle (rent, food, car). Savings for them is just a pipedream. Many have it even worse as they face student loan payments of $250 per month or higher. Imagine that after tax you bring home $2000 per month. Now your rent is $800, food is $200, student loans are $250 and your car eats another $400 (payments + insurance). That leaves you with $350 per month. Now with this you try to save up for a house? Forget it even if you lived like a hermet, 2 people would take 2 years to save up enough money, and even then you could only afford a small appartment.

Society is facing for perhaps the first time a situation where the next generation is worse off then the previous, it is only a matter of time before this comes to a head.

The youth unemployment rate has been quoted at 15% or higer. If you do find a job chances are it is low paying or very unstable. It is far too easy to get expensive credit that only makes the problem worse.

Sorry for the rant...

brant
...


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Author: dlread One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 89 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/12/1999 9:24 AM
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I am seeing a major problem in society right now. Most of my peer group (25-30) is very depressed with their situation. The job market is very limiting even if you have a degree. Most people are entering the workforce at the $25K level and can't make ends meet for even the most basic lifestyle (rent, food, car). Savings for them is just a pipedream. Many have it even worse as they face student loan payments of $250 per month or higher. Imagine that after tax you bring home $2000 per month. Now your rent is $800, food is $200, student loans are $250 and your car eats another $400 (payments + insurance). That leaves you with $350 per month. Now with this you try to save up for a house? Forget it even if you lived like a hermet, 2 people would take 2 years to save up enough money, and even then you could only afford a small appartment.

Yep, true it can be hard to live on 25k/year but I can see some ways of saving some money.

If you are lucky enough to live in an area where public transport is available, you can use that instead of buying a car. In Ottawa, Ontario it can cost only about $60 per month to travel by bus. If you are even luckier and live near enough to your workplace to be able to bicycle in (and if you can find a safe enough route) you can save on transit costs for about half the year (and stay very fit). I know some folks who bike right through the whole winter but I find it too dangerous here in Ottawa.

You can also save quite a bit of money by sharing accomodations which could cut your $800 per month rent to $400. Using your scenario, this would leave you with just over a $1000 per month savings, which is not too shabby.

The assumption is that eventually your salary will increase and you can change your lifestyle accordingly - or maybe you'll want to continue to save that extra whack of dough every month.

Of course, saving money gets much more challenging when kids come into the picture.

-Dave-

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Author: cirus Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 91 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/14/1999 2:09 PM
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Chris,

"We have crappy tax rules all over the place. One thinks about moving to the US because of all this .....that's for sure."

and the Feds will be waiting for you at the border, to collect the so-called Departure Tax :-) (really, it's true)

This is clearly beyond ridiculous. I have been in Canada just over 10 years, and, although I have much to be thankful for, I am truly appalled at the oppressive nature of the taxation system and labyrinth of rules and requlations designed to squeeze every last nickel from our pockets.

As one who recently transferred into Nortel's Wireless division (from Enterprise), I am already feeling the magnetic pull from our Richardson (Dallas) office. A colleague of mine just transferred there and after two months, is already saying that he's not coming back. He's applying for a Green card.

IMHO, the Canadian Income Tax act should be abolished and rewritten. The current rules are stifling productivity - the tax levels are too high (even here in Calgary), not to mention the bracket creep that we all endure. What's the incentive to earn more when 50% or so of every $ goes to the government?

I also despise the fact the our government penalizes families who decide to have a parent stay home to look after their children. Clearly, the govt expects and sets policies encouraging both parents to work, just so that they can afford the annual tax grab and have just enough left over to have a decent living. IMHO, this is not only bad for the daycare children today, but will have far-reaching social consequences in the future. Can you spell C-O-L-U-M-B-I-N-E H-I-G-H S-C-H-O-O-L ?

Then there are the prohibitive rules for investors. Our Capital Gains tax is ridiculously high (almost 2x the LT US equivalent), not to mention the total BS re: Foreign content rules for RRSPs. I totally disagree with the nationalist/protectionist argument that we need to force the population to keep their money at home. I do not know of any other country on earth that restricts where people can invest their retirement money. If the argument that Canada would suffer were true, then in the last decade we would have seen the financial collapse of many of the European countries as most of the investment funds went to the US. Companies and Countries alike should remain competitive. Don't forget that multinational companies now have a choice where they are located. This has much more dire consequences for uncompetitive countries than allowing individuals the freedom to invest where they choose.

Then there's the Mortgage tax relief - they have it in the UK, the US and other countries, but, you guessed it, not Canada.

The list goes on...

Sorry for the rant, just my $0.01 (it would have been $0.02 but the govt took the other penny).
Ciao,
Tony

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Author: jbeaton99 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 158 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/26/1999 4:41 PM
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Tecmo - here's my $.02 worth:

1) Canadian taxes are very high, both personal and corporate - certainly far higher than for our biggest trading partner down south
2) It is far more difficult to amass significant retirement savings without a tax-sheltered investment plan
3) The vast majority of Canadian's retirement savings will be spent in Canada
4) The success of Canadian companies will be determined mostly by their own qualities, rather than the existence of an artificially large pool of investment capital

Sooo, why not let Canadians invest wherever they want? The proceeds will only be brought back into the country, helping our economy. Good Canadian companies can find capital, and bad ones won't be helped by it in the long run anyway - it will only delay the inevitable.

Thoughts?

JDB


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Author: genome Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 161 of 1193
Subject: Re: Fed up with 20% FC in RRSP? Date: 11/29/1999 8:02 AM
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JDB,

There are a couple of points I'd like to raise with regards to your foreign content post:

4) The success of Canadian companies will be determined mostly by their own qualities, rather than the existence of an artificially large pool of investment capital

In a straightforward way, this is true. There are possible reprecussions though. Taking away the investment capital will reduce stock value and liquidity. A market that is not performing well will have a negative effect on employee stock options, which could cause more employees to flee south of the border (for a better chance to increase their personal wealth). A company is only as good as its employees.

3) The vast majority of Canadian's retirement savings will be spent in Canada

I'll have to disagree with this one. Many of the successful (read: wealthier) people I know who have retired became snowbirds and fled to Florida for half of the year. This means a good portion of the money they made in Canada is now leaving the country. This is great for them, because they now have the life they've wanted, but its not great for the Canadian economy.

That being said, if these snowbirds made more money on foreign exchanges, the total dollar amount spent in Canada would still increase, even though all of it wasn't coming into our economy.


Carl

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