Tax-Free Savings Accounts: Expanding, Restricting, or Refining?

The 2015 near-doubling of the contribution limit for tax-free savings accounts (TFSA) raises fundamental questions about the potential benefits for individuals and the economy; it also presents an occasion for examining deficiencies of the original TFSA scheme. This study provides the first in-depth...

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Bibliographic Details
Published inCanadian tax journal Vol. 63; no. 4; p. 905
Main Author Kesselman, Jonathan Rhys
Format Journal Article
LanguageEnglish
Published Toronto Canadian Tax Foundation 01.10.2015
Subjects
Fiscal policy
Income taxes
Savings accounts
Statistical analysis
Studies
Tax benefits
Tax free
Canada
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Summary:The 2015 near-doubling of the contribution limit for tax-free savings accounts (TFSA) raises fundamental questions about the potential benefits for individuals and the economy; it also presents an occasion for examining deficiencies of the original TFSA scheme. This study provides the first in-depth critical policy analysis of TFSAs based on an assembly and synthesis of key available statistics on the provision. The study further assesses evidence on the long-run cost of the TFSA provision for federal and provincial income tax revenues and the old age security and guaranteed income supplement programs; the resulting figures, though subject to considerable uncertainty, are very large. Public perceptions that enlarged TFSAs will be of widespread benefit to many individuals and of little consequence for others not utilizing TFSAs are thus incorrect. The unconditional increase in the TFSA limit cannot be justified on economic or equity grounds, but the scheme has additional deficiencies that also require policy reforms.
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ISSN:0008-5111