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Update of PBO’s Tax-Free Savings Account Analysis
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Budget 2015 proposes to increase the annual contribution limit on the Tax-Free Savings Account (TFSA) program beginning in the 2015 tax year, from $5,500 to $10,000. Unlike tax years prior to 2015, this amount would not be indexed to inflation in $500 increments.
TFSA fiscal and distributional effects were examined by the PBO in a February 2015 report. This analysis updates those past PBO estimates for proposed Budget 2015 changes.
Under the proposed rules, PBO estimates that TFSA program costs will roughly double in four years’ time, measured as a share of the economy. As is the case for the existing program, fiscal impacts would be split between foregone revenues and increased transfer benefits payable for both the federal government (two-thirds) and provinces (one-third).
The distributional effects of the TFSA program were also examined by the PBO in February 2015. Changes proposed in Budget 2015 would not materially affect PBO’s estimated distributional profile, when measured by income.