Regarding Mr. McTeague's proposals, as I understand it, where contributions result in a tax deduction, there will be significant financial implications for the government during the contribution years. When the funds are withdrawn in the student's name, because students for the most part do not pay any taxes, the tax revenue would not be recovered.
Based on our understanding of the proposed initiative, we've drawn some conclusions, in terms of the bill's tax implications. Assuming that taxpayers' behaviour would not change, meaning that the new measures would not result in additional contributions, we have estimated that the financial cost of implementing the new measures would be $565 million in the first year. As I stated, these costs would not be recovered in instances where the funds would be withdrawn in the student's name, because generally speaking, students do not pay any taxes.
We could do a more detailed calculation and take into account the fact that some of these amounts could be taxable. However, it is logical to assume that most of the contributions would not be taxable when withdrawn for the students' benefit.
The costs could increase substantially, if we take into account the fact that contributors could increase their contributions to take advantage of the tax incentives.