Two campaign promises for the contracting industry

Prime Minister Stephen Harper first pledged that, if re-elected, he would re-boot and make permanent version of the Home Renovation Tax Credit programme so popular a few year ago.

The next week, Harper said a Conservative government would increase the upper limit of the Home Buyer’s Plan to $35,000 from the current $25,000, allowing purchasers to use more of their RRSP’s value without penalty for the purchase of a first home.

Call it ‘HRTC-Lite’
The HRTC was introduced in 2009 as a temporary measure. Around one in every three households, approximately three million Canadians, used the program. It was among the most popular of the party’s tax credits at the time and one of the few that was supported by both the Liberals and the NDP.

However, this time around the credit would be a 15% annual credit on renovations between $1,000 and only $5,000, and would only be introduced as the country’s economic status permitted, perhaps in 2017-2018. The Conservatives estimate the permanent program would cost around $1.5 billion a year

Spend now, postpone retirement savings?
The increased limits for using an RRSP to buy a first home is designed to be attractive to those who have seen house prices in Canada rocket upwards over the last few years, notably in Toronto and Vancouver. As a condition, the homebuyer would still have to pay back the funds within 15 years without the benefit of the RRSP contribution tax credit while replenishing the money. This increase in RRSP tax-free withdrawal limit would cost the government $30 million a year in lost tax revenue.

Harper’s words were very similar when making both announcements: “For most Canadians, the family home is their biggest asset and their most significant investment in their future financial security,”…..“It’s also the centre of their lives.”

Not everyone is enthused
Although neither the Liberal nor NDP leaders have made specific comment on these two Conservative promises, some within the building industry have suggested favourably that the HRTC will encourage consumers to hire HST-paying contractors and trades. However, critics of the higher RRSP withdrawal limits claim Harper’s promise to first-time home buyers will lure Canadians towards the high-priced residential real estate market and away from longer term retirement savings strategies.

Regular contributor Alec Caldwell has his thoughts to add…..

What do you think?

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