TFSA analysis in Budget 2015 does a number on Canadians: report

June 1, 2015

OTTAWA—The federal budget’s claims regarding who would benefit from doubling the Tax Free Savings Account (TFSA) annual contribution ceiling exclude key contextual data thereby leading to erroneous conclusions, says an analysis released today by the Canadian Centre for Policy Alternatives (CCPA).

The analysis, by CCPA Senior Economist David Macdonald, finds the government’s claims that raising the annual TFSA contribution ceiling from $5,500 to $10,000 would disproportionately benefit lower- and middle-income Canadians use misleading income groupings and excludes data to show a distributional impact that is directly opposite to the one it actually has.

“The idea that doubling the annual TFSA contribution limit to $10,000 would disproportionately benefit low-income Canadians is pure fantasy. Rather than facing up to the facts, the government tried to hide the truth in misleading charts within Budget 2015,” says Macdonald. “The truth is that TFSAs disproportionately benefit the wealthy.”

Macdonald uses identical data to offer up an honest analysis of TFSAs and finds no matter where Canadians fall on the income ladder, the number of people managing to maximize their TFSAs remains small:

  • Sixty percent of those earning between $20,000 and $40,000 a year (the middle income classes) don’t even have a TFSA, while 70% of those making over $250,000 (the richest 1%) have opened a TFSA.
  • For the bottom half of the population (making under $30,000 a year) only 5% or less have maximized their TFSAs.
  • The bottom 25% of tax filers (those earning less than $10,000 a year) would only see 8% of the potential benefits of doubling the TFSA contribution limit.
  • The richest 10% (those making over $100,000 a year) would see 22% of the potential benefits of doubling the TFSA contribution limit.

“There was no public clamour to double annual contribution limits. Only 7% of Canadians were able to maximize their contributions by 2013, and even fewer families,” says Armine Yalnizyan, CCPA senior economist who has recommended lifetime contribution limits and a cap on tax-free assets in TFSAs since 2009. “Without limits, TFSAs increase income inequality and jeopardize public finance. With limits, the program can benefit low- and middle-income Canadian savers. It shouldn’t be scrapped, it should be fixed.

The report recommends the creation of a new lifetime TFSA contribution cap of $150,000 and a new maximum TFSA asset cap of $300,000.


The Number Games: Are the TFSA Odds Ever In Your Favour? is available for download on the CCPA website.

For more information contact Kerri-Anne Finn, CCPA Senior Communications Officer, at 613-563-1341 x306.