A private members' bill passed third reading last night in the House. It would mark a major change in tax policy and would be to the benefit of parents trying to save money for their children's post secondary education.
Registered Education Savings Plans, or RESPs, allow parents to set aside money for this purpose (up to $5000 per year); with growth in the plans tax free and normally taxable (with a 20% penalty) only if the recipient child hasn't started attending an approved institution by the age of 25. Their major drawback is that the contributions in them are not tax deductible. While the previous Liberal Government did sweeten the deal a few years ago by adding a 20% bonus to contributions, up to a maximum of $500 per year (on a presumed $2500 contribution), the non-tax deductability of the plans still put off a lot of parents.
Bill C-253, proposed by Dan McTeague, would make such RESP contributions deductible up to $5000 per year (that's $5000 in 2006 dollars, with an index adjustment each year the same as tax brackets), and the deduction would be retroactive to 2005 when the limit was only $4000. One presumes that like the RRSP, this deduction would only amount to a tax deferral and that the payouts (contributions plus growth) would be taxable on withdrawal. However, these payouts would be taxed in the name of the child and since he or she would almost certainly be in a lower tax bracket than the parent when the contribution was made, it would be a net revenue gain in favour of the family.
This is progressive legislation at its finest, and because of that the Senate should definitely give this bill quick consideration and passage. Several examples of other progressive legislation we have on the books are due to private members' bills from both Houses, not government bills. This is the kind of pro-family bill that promotes national development and would also help in slowing the brain drain on a long term basis. McTeague has succeeded in having several private members' bills passed over the last decade or so (including one about evading further police pursuit, and another promoting organ donation), and this bill continues in that line of reasoned thought; not like the perennial competing bills to make Chemaimus BC and Welland ON the "mural capital of Canada" or the repeated attempts by some to reinstate the death penalty here.
It's a good thing we don't have a "Ten Minute Rule" here, like they do in the United Kingdom, and that backbench bills at least have a chance to be heard in Canada even if for only one hour. Private members bills in the UK have a rats chance of being passed -- although some do, such as (oddly enough) the abolition of the death penalty there in 1965. Under a ten minute rule here, smart guys like McTeague wouldn't even have time to clear their throats.
UPDATE (8:59 AM EST, 1359 GMT): Yeah, I know, McTeague voted for C-484. You can't win them all; or be correct about absolutely everything. If he wants to vote his conscience, though, I will not take that away from him.
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