Thank you, Mr. Chair.
I'm the only witness who got some chocolate. I suspect it's a perk because I'm the last one to speak.
Mr. Chair, vice-chairs, and members of the committee, thank you for inviting me to assist with your study of Bill C-59, Part 1.
My comments are focused on the increase in the annual contribution limit for Tax-Free Savings Accounts (TFSAs), a measure the Office of the Parliamentary Budget Officer has studied in detail.
Before the changes proposed in Bill C-59, the fiscal impact of the TFSA program was expected to grow from $1.3 billion in 2015 to $54 billion in 2060. This is equal to a roughly eightfold increase as a share of the economy. The changes to the contribution limit proposed in Bill C-59 would increase the impact in 2060 by a further 20%, to $63.6 billion.
The proposed TFSA limit of $10,000 will not be indexed to inflation. This policy decision reduces total long-run fiscal costs by 15% in 2060.
The implications of the changes in Bill C-59 to the long-run sustainability of debt as a share of GDP will be assessed by the PBO in a future report, our fiscal sustainability report.
Over the long run, the TFSA program will become increasingly regressive, by income and especially by wealth, as you can see in Figures 2 and 3 of our presentation. By 2060, households in the top half of the income distribution will benefit by 20% more than households in the lower half. The wealthiest 50% of households are projected to benefit by 1.2 times more than the lower half.
Finally, Mr. Chair, as per your question the other day about the amount of new money or existing savings invested in TFSAs that involve the purchase of equity or bonds in Canadian companies, I can report that TFSA administrative data and other data sources that we have obtained so far cannot currently be used to determine whether investments in Canadian equities or bonds have increased due to TFSAs.
However, TFSA contributions are expected to originate mostly from the reallocation of existing savings and taxable accounts. External estimates of the responsiveness of savings through tax-preferred programs like the TFSA are mixed, but typically small. The PBO therefore expects that a comparatively small proportion of TFSA contributions will be the result of new savings. The TFSA is relatively new and the PBO has not yet independently assessed the savings behaviour of Canadians in response to the TFSA program, but this work could be pursued in a future study.
Thank you, Mr. Chair.