Summer Reprise: Canadian Government Hates Single Income Families (Final Analysis)

Given it is the summer and my mind is not on the world of finances today, I will reprise one of my more controversial statements which was one of the first postings I did in 2005. Hopefully my mind will swing back to the world of personal finance in a while.

Canadian Government Hates Single Income Families (Final Analysis)

So what have we learned?

  1. In our specific scenario (read all of my disclaimers in my previous posts) a Single Income Family as compared to a Dual Income Family, pays:

    Approximately MORE in taxes (that is Provincial and Federal taxes combined).
  2. This means that the Single income family to NET the same would have to make over $12,000.00 GROSS more to bring home the same amount (that is just unfair). Remember the single income earner at that level is taxed at the HIGHEST level on that extra income.
  3. The Dual Income family is MORE likely to be eligible for:
    1. Family allowance cheques
    2. Provincial tax credits
    3. Pay less for the Ontario OHIP TAX
  4. The Dual income family gets to write off a great deal on Daycare including:
    1. Daycare costs
    2. Summer Day Camps costs

If this doesn’t convince you that the Taxman HATES Single Income families, I don’t know what would.

If you agree or disagree comment on this, I am willing to dialogue with folks on this, but if you agree that this is UNFAIR, contact your member of Parliament. Remember an election is just around the corner, and they MOST LIKELY will return your calls (as opposed to afterwards when they kind of forget you exist (IMHO)).

What can we do to fix this?

  1. Introduce a FAMILY or HOUSEHOLD income concept, where spouses or live-in folk can split the income (or even level the taxes) of the house and NOT get taxed at such a high level.
    • Might promote more folks to stay at home with kids (thus not as much daycare)?
  2. Overhaul the whole tax system, so that everyone pays the same thing. Here I should be careful, because they’ll just end up making dual income folks pay as much as Single income folks!
  3. National Daycare moneys should go directly to the families, (ALL OF THEM) and let THEM figure out what to do with the money (ok, now I sound like Ralph Klein).

The previous points are MY Opinion only, but maybe it’s time to get more than just crazy crackpots like ME thinking about this?

If you want to compare this and have Quicktax, it’s dead easy, just create an extra return in it, and compare what you might pay if you were a Single Income earner!


Best of: I should Divorce My Wife?

I have been cleaning up my directories and looking over the 900+ postings I have been doing over these past few years and I came across this gem, I Should Divorce My Wife? which points out how strangely set up the tax system is. The concept is purely a “what if” scenario.

I should divorce my wife?

I read that one on the Alan Baggett news site, and scratched my head but it is actually how the tax system is set up currently. If I divorce my wife and pay her Alimony (not child support, remember that case a while back, where that is taxed in the payers hands) I can effectively split my income.

I remember having this argument that in the Government’s eyes the following scenario would be ideal:

  1. Divorce my wife, and pay her half my salary as Alimony (thus sharing my income)
  2. Have my children live with me, so I might be able to claim the Child Tax Credit and Ontario Tax Credit
  3. Rent my wife an apartment in the basement of my house (with it’s own entrance).
  4. Have my wife take care of the kids (as daycare) and write off the money I pay her on my income as well (and she does it in my home, so I write that off too).

OK, ok, this is a ridiculous scenario (and I’m sure some might even claim illegal, although I’d love to see that taken to court), but this is how messed up {sic} the entire Canadian Tax System is! I checked this with Quicktax and it was quite happy to show me the obscene amount of tax I’d save.

Alan’s tax bible is an interesting read, as are his stories (they are a little “he said, she said” which at times I am not fond of), but still interesting to read how some people are persecuted by the Tax system, while others get off “scott free”.

Please let me repeat, I do not condone the above tax sharing concept (but if you get away with it drop me a line, I’d be curious to hear).


The Computer: Another Financial Tool

My major tool in my Financial Planning activities is my computer. I use it to track my spending, I use it to make up financial plans for the coming time, and I use it to analyze my spending habits, all in all a very powerful tool for me.

My wife prefers to use pen and paper because she likes to see the spending and such, and if that is the way you work, I have no problem with that either. It takes a little longer, but maybe when it takes longer you might notice and absorb more information from the data entry side of things.

Financial Tools

Old Laptop

Even this overheating, BSOD’ing and old piece of equipment can be used effectively.

My major tools that I use (I am not endorsing these computer tools, I am simply pointing this out to be complete) are:

  1. Quicken, first and foremost this is the tool I use to keep track of spending and attempt to report trends and such. A very powerful tool, that I still don’t think I am using completely correctly.
  2. Tax software, in this case Quicktax, but only because it is so simple when I do it this way and I can E-file my taxes which is quicker and easier for me. I also use that tool to infuriate myself figuring out what might happen if the Government supported Income Splitting.
  3. Excel or whatever spreadsheet you like. I like to extract data from Quicken and then use it for some elementary calculations and forecasts in Excel. Excel has some very powerful financial functions, but make sure you are using the Canadian versions for Interest calculations and such.
  4. Powerpoint, to present information easily to my wife or to my banker, if I am going in to try to get Free Banking
  5. Internet Explorer or a browser for On line banking, and thanks to my PC I no longer walk into my local branch weekly to get my banking updates, I get them daily on line. This is an amazing capability that we take for granted that didn’t exist 20 years ago. I pay bills that I don’t have to mail in any more either.
  6. Firefox or Internet explorer as a research tool, by looking up on Government sites I learn about Tax rules, by reading company’s web pages I learn about good investments and by reading some amazing Blogs, I learn about Finances in general (see my right bar for some excellent financial bloggers).

These tools make Personal Finance for me a little easier to deal with.

Take Care of your PC

As with all tools, you must maintain your PC. Yesterday my PC was taken away, because it was doing suspicious “Virusy” things at work and now I sit at my kids’ computer attempting to get anything done. I am lucky because I have an entire I.T. group to take care of my PC (for now), most folks do not, so here is my views on the minimal I.T. tasks you should be performing on your PC (this advice I do actually stand behind, because this is an area I think I have some expertise):

  1. Backups, backups, backups! If there is any data on your computer that is important, you must make sure itis backed up in some fashion. There are many ways to do backups
    1. Back data up to CD’s or DVD’s if you have a CD writer. If you don’t have a CD or DVD burner, go get one NOW.
    2. Norton and other services are now offering network based back up services that you can subscribe to. I would read their agreement closely to see what re-courses you have if your secret data is compromised by their backup system, but this is still another way to go.
    3. If you have TWO computers at home, make a BACKUP directory on each, and back up important data on the other machine. At least if one fails you still have your data.
    4. Floppies? Well, if you think that is the way to go, knock your socks off, but I do not recommend it.
  2. Restore! Yes this is just as important, you must test that you can restore data from your backup system! Backups are useless if you cannot retrieve your data. If you have important data already backed up on floppies, transfer it to DVDs or Cd’s or something. Also check the state of your old important backups, because the Media it is on, does degrade.
  3. Anti-Virus software, get something, ANYTHING, but do not think that your Internet Access provider or your good ideas are going to stop viruses from getting on your computer. Use Norton, McAfee, NOD or others, but use something or your machine will become compromised.
  4. Anti-Spyware software too, most anti-virus systems now come with Spyware checks as well, important to get this kind of software, or you are going to end up selling Herbal Viagra from your PC.
  5. Clean your computer. Vacuum out the fans at least, or take it to a reputable local computer shop to have it cleaned (ask for references from the local shop, if you don’t know the owner). I had a fan break on my CPU, due to dust and my machine was gone for a few days.

There are many other tricks of the trade you should think about, but this is my minimum list. If anyone else cares to comment on other important tasks, please feel free, as I don’t think this list is exhaustive, just a good starting point.


What is RICH in Canada?

Stats Canada has published an interesting article outlining what your income level in Canada needs to be, to think of yourself as RICH (for 2004 at least):

An annual income of $89,000 was enough to put an individual among the 1.2 million Canadians who made up the top 5% of the country’s taxfiler population in 2004, according to a new study.

Similarly, an income of $181,000 was sufficient to put someone among the 237,000 people in the top 1% of the taxfiler population.

But to be part of the richest one-hundredth of a percent (0.01%) of taxfilers, Canadians had to have income of more than $2.8 million, the study found.

Interesting striation of the data, now this is individual income too, not sure how they would measure dual income families and such, are you Rich? Really Rich? Super Rich?

September continues on, and with the beginning of Autumn, do you need to start thinking about fall financial things?

  • RESP top ups for the end of the year?
  • RRSP top ups as well?
  • Insurance coming due soon?
  • Property tax assessments coming?
  • Preparation for the holiday season, by planning what you are going to spend and maybe figuring out “who gets what” early on?

Just some of the ideas to think about instead of raking leaves!


How do you Retire With Kids at Home?

Stats Canada published a plethora of interesting statistics yesterday from the 2006 Census that I find quite interesting, and very topical in the area of Personal and Home Finances:

  • For the first time there are more unmarried folk over the age of 15 than there are married.

    In 2006, more than one-half (51.5%) of the adult population were unmarried, that is, never married, divorced, separated or widowed, compared with 49.9% five years earlier. Conversely, only 48.5% of persons aged 15 and over were legally married in 2006, down from 50.1% in 2001.

  • A large increase in 1 person households (i.e. people living alone). More of us living on our own? Interesting, one theory put forward is folks are trying to get themselves together financially and mentally before committing to a long-term relationship, and if that is the case, that is a good thing (in my opinion).

The one really interesting statistic for me is the following:

Over the last two decades, one of the trends for young adults has been their growing tendency to remain in, or return to, the parental home. This upward trend has continued over the past five years.
In 2006, 43.5% of the 4 million young adults aged 20 to 29 lived in the parental home, up from 41.1% in 2001. Twenty years ago, 32.1% of young adults lived with their parents.

Among individuals aged 20 to 24, 60.3% were in the parental home in 2006, up from 49.3% in 1986. Among those aged 25 to 29, 26.0% were in the parental home in 2006, up from 15.6% two decades earlier.

So, more and more of us are not becoming “Empty Nesters” in fact we are turning into a “flop house” for our 20-year-old kids? That seems to line up with my observations from friends and acquaintances that I know, where kids go off to University to get their degrees, but then returning and moving back into the family home?

I must admit that I was somewhat guilty of that on work terms, but managed to not move back in with my parents after I graduated.

My question is how can you retire if your kids have moved back in with you? I guess if they move back in, and start paying room and board, that might be OK, but if they move back in and resume their role as “child” while pulling in a large salary, I do have problems with that. They keep calling my generation the “Sandwich” generation because we will have to care for both our parents and our children eventually, these statistics seem to imply that may well be the case.

I have attempted to instill in my kids a real desire to leave the house. Useful statements like:

  • “You don’t like me harping on you to do your chores? Well if you had your own place, that wouldn’t happen would it?”
  • “If you don’t get a summer job, you’ll be watching your brother all summer for me”
  • “You want money? Room and board is not enough?”

I am kidding (although I believe in a few spots, I have actually said that to my kids at some time). It is important to get our kids prepared to spread their wings and leave the nest (and then move the NEST).


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