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dwot (99.50)

Biggest Sucker of All Nations

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December 12, 2007 – Comments (5)

So, the Bank of Canada is putting money in the markets to increase liquidity.  

No doubt the Bank of Canada is looking at this seriously, when you consider that the Canadian Pension Plan started taking our Canadian tax dollars and putting them into the market.  Do a search and you will stories on Canada being an exemplary nation in how we found a solution to our pension problem and funding it for the future.

I started making plans to not live out my retirement in Canada when I read about the plan almost a year ago and I really questioned all those hard years Canadians put in with higher taxes to get our debt under control.  Indeed, during these boom years Canada has had significant surplus budgets, which is what government ought to have during an economic boom.  You are in serious trouble if your government doesn't have a surplus when times are good.

I think the plan was modified about 5 years ago, but like an average person, I wasn't paying attention to what they were doing, so I only read about when I was doing research on the degree of transference of wealth from youth to age. I was looking for other information and was horrified by what I found.

I expect they've crippled our pension system beyond repair with their "exemplary" plan instead of putting the tax dollars on our debt.  And no kidding they are now trying to support the financial markets.  Lets just throw out more good money...

5 Comments – Post Your Own

#1) On December 12, 2007 at 6:36 PM, dwot (99.50) wrote:

I am so disillisioned. 

Canada had 54.9% taxation for our highest tax bracket which started at $80k, and that was when an average home cost about $300k in Vancouver.  So you were considered the "wealthy" to tax when an average home moderately unaffordable, and actually, if you were to adjust disposable income because of the high level of taxation, that would push housing costs into the seriously unaffordable.

I'd say that I was in a minority in saying as much as I don't like taxes any more than the next guy, but our debt was serious and that was necessary.  

I am just wondering to what benefit?  

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#2) On December 12, 2007 at 7:01 PM, leohaas (91.57) wrote:

A home costs $300k, and you are paying 54.9% tax? Buy that home and get a big mortgage: your gvt will pay 54.9 % of you interest!

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#3) On December 12, 2007 at 7:45 PM, StockSpreadsheet (74.38) wrote:

Leo,

Dwot can correct me on this if I am wrong, but I don't think that mortgage interest is tax deductible in Canada, (nor for most/all of Europe if memory serves me correctly).  I have read that most foreigners think that the deductibility of interest, (credit card interest was deductible not that long ago), is what has lead the U.S. to be such a debtor nation.   Interest payment are much more burdensome if you can't deduct it from your taxable income, (especially for those in higher tax brackets, since they effectively get much larger percentage deductions.  I have also read that this non-deductability of interest in one of the reasons most other nations have higher savings rates than in the U.S..  If the interest isn't deductible, then you would want to save more for the down payment so you could finance less of the purchase price of the home, (since you end up paying back about 3 times the price of whatever amount you finance, as was shown in one of the "Six Degrees of Leverage" posts.  (Of course, a lot of other nations also require a larger downpayment, which would be another reason for the larger savings rates.)

I'm sure dwot or somebody will tell us if I am wrong regarding the mortgage (non-)deductibility issue.

Craig 

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#4) On December 12, 2007 at 8:29 PM, dwot (99.50) wrote:

In Canada you do not deduct mortage interest.

Interesting that you bring up how being able to deduct interest has lead the US to be such a debtor nation.  I was discussing these differences in values with an American friend who described seeing most people he knew using their homes as ATM machines, which is something I haven't noticed at all in Canada. 

I know when I worked in the bank there was a very small number of clients that would ring up a bunch of credit card debt and every time their mortgage came up for renewal they'd increase the amount.  But, I had a very good mentor who took me through the numbers to show how foolish they were for not managing their finances.

Affordability surveys are done on the median home price to median income ratio and it probably ought to be corrected for taxes and probably medical insurance.  We don't pay medical insurance here, well, just a pittance by comparison to what Americans pay, maybe around $100/month for a family.  It isn't a big enough figure to capture my attention enough to remember it.

 

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#5) On December 13, 2007 at 8:49 AM, dwot (99.50) wrote:

I did some checking, Canada has $121 billion invested in the markets.  That's about $4k per person and about $8k per person that will qualify for a pension.

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