The Harper government's recent move to raise the contribution ceiling on tax-free savings accounts offers little to benefit low- and middle-income Canadians, a new analysis of federal tax data has found.
The study, released Monday by the left-leaning Broadbent Institute, comes after the government nearly doubled the maximum annual TFSA contribution limit to $10,000 from $5,500. The Conservatives made good on an 2011 election promise with the April change, effective this year.
The report, however, said under the $5,500 yearly cap, there had already been a steep drop in the number of people who maxed out their TFSA contributions.
Maximization rates were higher for people in the upper income categories, says the study, written by Simon Fraser University economist Rhys Kesselman.
The research was released as politicians clash over what could become a pivotal ballot-box issue in the October election: how best to help Canadians save for the future.
The debate over TFSAs, in particular, has been central in the fight to woo voters in the so-called middle class.
Kesselman, whose past research helped build a foundation for the government's initial introduction of TFSAs six years ago, found in this latest report that 62% of Canadians eligible for a TFSA had yet to open one by the end of 2013.
His number crunching of Canada Revenue Agency data also revealed that of all the people who qualified for TFSAs — but didn't necessarily have one — only about 6.7% had maxed out in 2013.
For those who actually held a TFSA in 2013, only about 17% had reached the contribution limit.
Kesselman said that among those eligible for TFSAs with annual incomes below $60,000, only 5% hit the ceiling.
By comparison, the maximization rate was 31% for those with incomes higher than $250,000.
