Tag Archives: taxes

Economic Overhaul – Election 2021

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Economic Overhaul – Election 2021

 

Three weeks to go until an election, and we have another contraction in the economy. What do all the parties say they are going to do about it? Let’s see, we will borrow money and increase government spending. We will increase subsidies to businesses, we will lower corporate/personal taxes, and increase various pitiful tax credits to families. Do any of these ideas sound new to you? Have any of them seriously changed the course of our economy before? No? Then why do they keep parroting them?

 

Because we keep voting for them.

 

Canada Votes

 

I personally believe we need an Economic Overhaul where we revamp the way our system works with some major changes, rather than small tweaks.

 

I’m going to outline four different approaches that I think can be used either individually or combined that could seriously alter the way our economy works for the better.

 

  1. The rules we have surrounding free trade agreements.
  2. Altering and prioritizing different tax methods.
  3. LEM- Labour Expense Multiplier.
  4. Variable sales taxes based on company size.

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Introducing the RRSP Snowball Technique

Hey everyone my name is Greg Tomkins from Simplemoneycanada.com. Today I’m going to show you a strategy that I like to call the RRSP Snowballing technique.

 

This technique works to increase the amount you can deposit into your RRSP year after year, without increasing the amount you personally need to save.

 

Usually what people do is they take their $1,000 a month, save it to their RRSP, then come tax time they spend the tax refund. This is not how an RRSP should be used.

 

What we are going to do instead, is invest that $1,000 a month, and also reinvest the tax refund back into the RRSP.

 

Right let’s take a look at how that looks for someone who makes $150,000 a year, saves $1,000 per month and invests their tax refund into the RRSP as well. I’ll assume a conservative 5% rate of return inside the RRSP.

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Why the rich pay lower tax rates

Why the rich pay lower tax rates

 

In case you haven’t heard, the rich get far more tax breaks then middle class Canadians. The problem is twofold, that tax deductions are based on your marginal rate, and how different sources of income are taxed differently.

 

Neither of these seem fair to most people, but it’s not my job to decide on what is fair and what isn’t. Rather my job is to understand it and educate anyone willing to listen.

 

To start, let’s look at why the rich get better tax deductions.

 

When you deduct anything off of your taxes, it saves you tax based on what your marginal tax bracket is. What this means is that someone who earns $70,000 will save 28.20%. While someone who earns over $220,000 will save 53.50%.

 

Let’s just assume Bob earns $70,000 and Sarah earns $220,000. They both have $10,000 in deductions they are going to claim on their taxes. Bob’s claim of $10,000 saves him $2,820 in taxes, while Sarah’s claim saves her $5,350 in taxes. Whatever deduction you have, saves you taxes based on your marginal tax bracket. Since Sarah is paying higher tax on her income, she also saves more by reducing her income through a deduction.

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