Tories' will axe tax deductible RESP bill

Opposition forced to change vote or bring down government

Tuesday, April 7th, 2009

A new bill could make it easier for students to avoid the crunch of rising tuition fees, but the political parties comprising the Opposition will have to fight for it.

The bill aims to amend the current Registered Education Savings Plan system by making annual donations of up to $5,000 to an RESP tax deductible.

Under the current system, money can only go to an RESP after taxes, though the government will match 20 per cent of a contribution to a maximum of $7,500.

First proposed over two years ago by Liberal MP for Pickering-Scarborough East Dan McTeague, the private member’s bill passed through the House of Commons last week.

With a final vote of 156 to 122 votes, a coalition of Liberals, the New Democrat Party and the Bloc Quebecois ensured the bill would make it to the Senate.

The Canadian Press reported Jim Flaherty, the Conservative finance minister, will introduce a budget measure to stop the bill. He cited the need to avoid a deficit as a reason to nix the bill.

Flaherty could not be reached for comment.

The government estimates making RESP contributions tax deductible would cost it $900 million a year, which surpasses the government’s projected budget surpluses.

The move will mean the Liberals must either reverse its votes on the bill or bring down the government and force an election.

“We’ve heard ultimatums from bullies before,” McTeague said. “I’m willing to meet him on the battlefield.”

According to McTeague, the bill will provide a huge bonus to Canadian families.

“I think you’re going to find very few people who are going to argue with it,” he said.

However, both the Canadian Alliance of Student Associations and the Canadian Federation of Students " Canada’s two largest student advocacy groups, raised questions about the bill.

“It’s important to recognize the group of students that will benefit from it,” Zach Churchill, national director of CASA, said.

“This bill will provide additional support to students from high and middle-income backgrounds whose parents have the money to save for their child’s postsecondary education " students who are already participating in our postsecondary system.”

McTeague, who said he was surprised by the opposition from student groups, felt the media had not done an effective job conveying the true intent of the bill.

“Most parents don’t have a lot of after-tax income to put into education,” he said. “[This bill] allows for a maximum of $5,000. That’s the ceiling point.”

He explained even families that weren’t able to put the full amount of money into the RESP would still benefit.

The bill also received heat for the perceived financial cost.

John Williamson, the federal director of the Canadian Taxpayers Federation, was skeptical of the need to amend the current system.

“[The CTF] has been opposed to it because we see it as a ‘boutique’ bill,” Williamson said.

“I think a lot of people realize that going to school or going back to school pays for itself and I’m not convinced the government needs to do more,” Williamson added.

McTeague disagreed: “No person can be left behind. There’s an economic and social imperative to do better than we have now. How are we going to attract investments and vitality in a knowledge-based economy?”

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