A Canadian's random thoughts on personal finance

Oct 4, 2008

Open letter on the RESP tax deduction

As long as I'm re-posting old letters I've sent, here's one I sent to my federal representative back in March regarding the proposed tax deduction on RESP contributions:

Dear Ms Ratansi,

As someone who stands to benefit a great deal from a tax deduction on RESP contributions, I think I can be considered unbiased when I urge you to reject this alarming misallocation of federal tax revenues.

Nobody believes more strongly than I do that education should be subsidized. However, until the country can afford to make post-secondary education free to all Canadians, we must target our spending to benefit those who need it most. A tax deduction on RESP contributions is directly opposed to this goal in two ways:

  1. It pays more to those in higher tax brackets, causing most of the money to reach people like me, whose children are in no danger of being unable to afford tuition.
  2. It pays less to those who can't afford to put money into RESPs in the first place, offering the least support to those most in need.

If you choose to allocate a billion dollars per year to subsidize tuition, you have a duty to ensure the money benefits those who need it most—or, at the very least, benefits all students equally. An RESP tax deduction does neither.

I trust you will give this matter due consideration.

In the name of conciseness, this letter left other issues unaddressed. One issue is the fact that this tax deduction would strangely benefit the parents rather than the students. If we're spending a billion per year on education, it stands to reason that the money ought to reduce costs or improve quality. This plan would do neither; instead, it would hand cash back to the parents, whom we then rely upon to improve the child's education rather than buy a big-screen TV.

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