Thursday, January 29, 2009

The leaks in the plan to fix my leaky roof



·           January 29, 2009

Good news! My roof is leaking. We noticed how bad it was getting last fall, when it rained and bits of plaster began to flake off the ceiling in the smallest bedroom upstairs. Lately, the problem hasn't gotten any worse, perhaps because Toronto is locked in a new ice age.

Assuming the glaciers retreat by spring, though, there's going to be trouble overhead. So was I ever glad to see Finance Minister Jim Flaherty's new temporary Home Renovation Tax Credit (HRTC). It will give a 15-per-cent tax credit, up to $1,350, on any home fix-it project that is "enduring in nature" and costs more than $1,000. What's the definition of "enduring in nature"? It appears to be anything that lasts longer than one year.

My new roof will certainly last longer than a year, unless I attempt the work myself, in which case it will take eight months to finish and will be leaking again three weeks thereafter. Luckily, I've already lined up a nice young man from Newfoundland to handle the job. By my calculations, the credit will save me $750 in taxes, based on his quote of roughly $6,000.

Thank you, Mr. Flaherty - and you too, Michael Ignatieff, for ensuring the budget will pass before the melting season begins. As tax policy, it is ridiculous. But the Commons is going to take care of my house. Why complain?

The Newfoundland kid did say he'd give a price break if I paid in cash. In that case, I'd presumably save $300 in GST. I don't want to give his business secrets away, but in total, I'd save more than $750.

And the money would be in my pocket today, not next year at tax time, which means I could go out and, you know, stimulate the economy when it's really needed. Of course, I'd never abet such a scheme to deprive the federal treasury of even a tiny portion of its rightful $225-billion in revenue. Who would? It's morally wrong, and that's why home renovations in Canada are never, ever done under the table.

It's a certainty that thousands of others will be taking up Mr. Flaherty on his generous offer to subsidize the home repairs they were planning to do anyway. And it's an equally sure thing contractors, painters and roofers will jack up their estimates accordingly, to claim a piece of the tax break for themselves. Maybe the Newfoundland kid will now say his quote is no longer valid. Those Newfoundlanders aren't dumb. They re-elected Danny Williams, you know.

Anyway, it's a quite a change from the Finance Minister who once declared that the federal government is "not in the pothole business." Maybe not on roads and highways, but if the pothole is in your driveway, Ottawa is pleased to assist. Driveway resurfacing is mentioned specifically in the budget as being HRTC-eligible. If you put down new sod, that's also eligible for a tax break, even if your teenage son tears it up practising his golf swing. But a new washing machine is not "enduring" enough.

If you lay a new carpet, that's worthy of a tax credit. But if you clean an existing carpet, it's not. What about a throw rug? The budget is not clear, but you've got to believe that someone, somewhere in the Department of Finance is considering the revenue implications of throw rugs versus carpets. Ah, well. The tax gurus need something to do, now that they've settled that bruising debate over the GST status of Timbits.

The most hilarious part isn't the arcane rulebook. It's the "examples" Finance officials have helpfully written to illustrate how the tax credit works. On page 129, Sally and Ed decide to replace their windows and insulation, and get tax relief of $1,350. Maybe next time they should inject some reality: "Sally and Ed decide to renovate their kitchen. After three months of arguing about it, Ed moves into the basement. The paint he buys to brighten his dismal new 'bachelor pad' is eligible for a tax credit, but the used couch is not."

And what will be the tax cost of all this hammering and painting and deck building and stimulating? About $3-billion over the next 14 months, Finance says. That's a lot of money, but it's nothing compared to the total cost of all the other exemptions and credits that governments have been inventing for years to suck up to this interest group or that industry.

Our tax system is riddled with these. Ottawa gives credits and deductions for buyers of textbooks, for tools for tradespeople and apprentice mechanics, for transit passes, for interest on student loans, for kids' soccer camp fees, for investors in speculative mining shares, and on and on. Liberal and Conservative governments alike are both at fault. Wonder why Mr. Flaherty can't afford to do more with income tax cuts? This is a big reason.

Many tax credits are legitimate. Who could seriously argue against giving a break for the cost of caring for young children, or the disabled, or educating university and college students? Those are in the public interest.

Fixing my roof is not. But I'll take the money anyway. Thanks again, Minister.


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