The Conservative government is vowing to kill a private member’s bill that would give tax cuts to parents who save for their children’s post-secondary education.
The Liberal bill would treat Canada’s Registered Education Savings Plan more like RRSPs, allowing parents to contribute up to $5,000 annually to an RESP for each child and deduct the amount contributed from their income taxes.
Essentially, contributors who pay taxes at a rate of 35 percent, a $5,000 RESP contribution would save them $1,750 on taxes. But the Conservatives have said they won’t let the bill become law.
Under the bill, contributions eventually would be taxed when they are withdrawn. But they would be taxed at the student’s income tax rate, not the contributors’, which should make the tax paid minimal.
Should the money be withdrawn for any reason other than education, or by the person who contributed, much higher tax penalties would apply.
Under current RESP rules, Canadians can contribute to education savings plans and have the money grow tax-free.
The federal government also matches 20 percent of contributions—up to $7,500—through a program called the Canada Education Savings Grant (CESG).
But that tops out at $500 annually, per child.
The chance to avoid paying income tax on up to $5,000 per year, per child, should make the program more enticing to Canadians. Currently, only 30 percent of parents are taking advantage of the existing system, which penalizes those who are middle-income families.
This vehicle helps Canadians achieve the dream of ensuring your children get higher education.
But the Conservatives once again have turned their backs on Canadian students by unanimously voting against the bill—claiming the expenditure could put the country into deficit territory.
After years of mega-surpluses, this government has nearly bankrupted us with its $25-billion spending spree that leaves little fiscal room to support working Canadian parents in saving for the education of their children.