One advisor’s open letter to Justin Trudeau

This is an opinion piece. Read your reactions to it here.

Justin — may I call you Justin? As you’ve been beamed into my living room daily for the past couple of months, I feel we’ve become close.

I think you’re going the wrong way on a couple of issues and, as a pal, I wanted to give you a heads up. You talk a lot about the middle class, but who are we kidding — you’re the closest thing we have to an aristocrat here in the Great White North. As the son of immigrants, both of whom were teachers and proud union members, I can give you the inside track on what the middle class is really worried about.

As a financial advisor, I work with Canadians who actually have $10,000 to save in their TFSAs each year. Many of them are the same people who voted for you: teachers, plumbers, office workers, executives and other people who wanted a change. They like their TFSAs and income splitting, but I guess they put thoughts of Stephen Harper’s retirement ahead of their own.

So, in the spirit of helping you get the next four years mostly right, let me give you some advice.

1. Quit the class warfare shtick.

If the “middle class” you mentioned in your campaign are earning between $45,000 to $90,000, then who’s buying all the houses in Vancouver and Toronto? If you make $90,000 in Toronto, you’re hardly living the dream, because the cost of living is so high.

Read: Who will benefit from Liberal tax policies?

Here’s a little tip about the middle class. They want to be more comfortable than they are — and they’re working for it. The middle class value fairness and a strong work ethic. Hard work has rewards, so don’t punish it with higher tax brackets.

2. Leave the TFSA alone.

Yes, I know you campaigned against the higher limit. And I know you think that limit would be costly. The Parliamentary Budget Office has pegged the future impact of keeping the higher TFSA limit at $550 million — or in Ontario, a little over half of a cancelled gas plant contract.

Such forecasts can become meaningless if the assumptions are wrong. It’s imperative to note that saving and investing by individuals is entirely discretionary. Further, allowing people to keep more of their wealth, rather than transferring it the to government, is not a cost. If people don’t save, then there is no future tax revenue.

Read: Trudeau Job #1: fix the economy

There’s also concern that most TFSA benefits accrue to the rich. Perhaps; they save the most and pay the most tax. But it’s also true that the TFSA is of greater benefit than the RRSP to middle and low income Canadians, since the RRSP only defers tax, while TFSA earnings are not taxed at all.

3. Get rid of boutique credits.

A key feature of the middle class is that they want desperately to do better for themselves and their families. Give them more tools to do that, rather than blunting the few they have.

Get rid of the maze of special interest tax credits for art camps, hockey teams, transit passes and the like. We keep forgetting to keep the receipts and claim them anyway. These are “conservative” ideas that you can toss. Real conservatives want a simpler tax code, and these little treats are more trouble than they’re worth.

Read: Teachers would get school supply tax break under Trudeau

4. Keep income splitting for families.

On this one, the late Mr. Flaherty had it wrong, and so do you. This is not about social policy – it’s about correcting a flaw in our tax system that treats many families inequitably.

The Parliament of Canada has already concluded in a report that “single-earner families may owe higher taxes than dual-earner families for the same level of family income.” And those are their italics, not mine.

Further, the same report found, “In five out of nine countries, including Canada, the tax burden on a single-earner family is significantly higher than that on a dual-earner family for the same level of family income.” In Canada, this amounted to 4% higher overall income tax, 6% higher tax in Sweden and 7% more in Italy.

And, a 2015 Parliamentary Budget Office report found that a family where one person earns $130,000 pays $1,540 more tax than if both spouses earned $65,000. The United States, France and Germany all permit married couples to pool their income for tax purposes.

So income splitting is not about giving a tax cut to the wealthy. It’s about ensuring that families of the same household income are taxed identically. To do otherwise means you are taking more from one family than another, just based on who earns what. It is not a tax cut to stop overcharging people on their taxes.

Now, Justin, I appreciate that tax policy is esoteric and boring. Tough to get a rally on this topic, even at an accounting convention. It’s easier to get the crowd going when you shout, “Tax the rich!” But this issue really is about fairness – and you said you stand for “fair and open government.”

Read: The Liberals have won. Should you worry about the TFSA?

In closing, Justin, if you respect the taxpayer, you’ll enjoy living in 24 Sussex even after the renovations are done.

Sincerely, Harper Fraze.

Agree? Disagree? Respond in the comments or write to melissa.shin@advisor.rogers.com.

Harper Fraze is a pseudonym for an investment advisor with a large, Canadian-based financial services firm. As with all columnists, his views do not necessarily reflect those of Advisor.ca.