Our federal Parliament is considering a Bill that should be tossed right out the window.
The private member's Bill, by Liberal Dan McTeague, would help the most affluent of Canadians take even better advantage of the deeply flawed RESP program.
The RESP program is supposed to help Canadians save for their children's post-secondary education but, like the RRSP, it is yet another tax policy that widens the gap between the rich and the rest of us.
Savings through RESPs have grown from $4 billion in 1998 to $22 billion in 2006. But only a third of Canadian children have an RESP account in their name. At last count it supported 190,000 students currently engaged in post-secondary studies.
Put this in context: There are about 1.3 million full-time students currently studying at the post-secondary level.
The RESP is a tightly targeted incentive for those who can afford to tuck money away -- the most affluent among us.
The McTeague Bill would make RESP contributions tax deductible and raise the amount that can be contributed annually to $5K. The bill would mean those contributing to RESPs won't pay taxes on money going in or coming out of these accounts.
On top of that, the bill doesn't reference existing tax deductions for tuition. That leads to double-dipping tax breaks - deduct taxes as you save for education, deduct taxes when you pay the tuition.
Of course it's the parents that are getting the tax break, not the kids. And most of those parents are getting the tax break on the highest tax bracket. On an annual tuition of $5,000 that means up to $2,300 tax savings.
Here's the injustice of it: Say a high income earner contributed to an RESP only four years at $5,000, and then claimed the tax deduction on a $5,000 annual tuition for a four-year program. On the $20,000 that is put aside for post-secondary studies, that high income earner could get as much as $18,400 back in taxes by sending one kid to post-secondary for an undergraduate degree ($2,300 for four years going in, and $2,300 for four years for tuition expense deductions).
Somebody who couldn't put aside money in an RESP but came up with the $5,000 a year for tuition for four years and was in the lowest tax bracket would also get money back from the government for the $20,000 they spent for their degree, but they would receive no more than $5,000 over the course of their program, and as little as $3,750, depending on what province they lived in.
In this system, the richest Canadian families could have tax breaks offset 92% of their child's education, while the poorest students could get as little as 19% in tax-subsidized assistance.
As Canadians committed to making sure everyone has a fair shot at an education in life, this raises some serious questions:
Why does the child of a high-income earner deserve more help from the public purse to get post-secondary education than the child of a low-income earner, or a student struggling to put themselves through?
If you're going to give money back to people for sending their kids to college or university or trade school, shouldn't it be at least the same amount for everyone?
Some estimate the McTeague program could cost between $600 million to $2 billion every year. Most of these vast amounts of money will go to those who least need the financial help. And that is why this Bill should be stopped in its tracks.
-- Armine Yalnizyan