Tax-free account great for those who can save money

The $5,000 a year tax-free savings account is a key piece of the federal Conservative budget announced last week.
Under this scheme, every person over 18 can put $5,000 annually into a registered account. No taxes will ever be paid on income earned in the account, or on withdrawals from the account.
The government estimates a loss of only $50 million taxes in the first year from this account, an estimate likely to be correct.
The plan won't be that popular until financial institutions start selling it and until the saving public catches on to the magic of tax-free compounded earnings. There's bound to be some confusion with the registered retirement savings plan (RRSP).
The RRSP difffers, in that it allows a tax deduction on money put in the account, charges no taxes on income earned in the fund, but taxes income withdrawn from the plan.
The new tax-free account is great for people who can save money, especially high income earners and excellent for a young person starting a career, but is of little or no use to low and lower-middle income earners struggling to make ends meet, let alone contribute to RRSPs for a tax rebate.
The tax-free account resembles the RRSP plan so closely you have to ask why the Conservatives would set up a plan that competes with the best and most popular retirement savings scheme the country has ever had.
Our local MP Dave Batters assures voters this plan is not intended to replace the RRSP system. He also says the new scheme will have no economic benefit.
But it will in the long term, by creating pools of capital to fund commercial and industrial development - a laudable goal.
By taking a look at the big picture, you can see where the tax-free plan fits in with an umbrella strategy to significantly change the way Canada's federal government works.
The eventual strategy of this government is to reduce the size of government and its impact on the economy and the individuals.
The first step in that direction was a $60 billion reduction in taxes. That's a 30 per cent reduction in spending, given the $208 billion budget tabled last week.
The thin budget surplus cushion appears designed to further the umbrella strategy.
When the economy goes into recession, as it will sooner or later, the government will run a deficit. The Conservatives have likely calculated that event into their strategy
Once the deficit appears, you can bet the government, bent on reducing size of government, will decide to further cut spending in line with its ideological strategy.
That will give elbow room for cuts into social programs and regional economic development spending, with less pubic uproar.
Keeping this direction will unravel 60 years of building social programs under Liberal governments, interspersed by like-minded Conservative governments.
Those individual and political supporters who support and advocate social programs to assist the disadvantaged with affordable housing, child care, income supports or assistance for new and existing social organization, will suffer.
Before he was prime minister, Stephen Harper told an American audience Canadian government would be unrecognizable if he had an opportunity to direct. He's right on target
On the surface, there is nothing wrong with this Harper scheme to dramatically change government. It's his right, and voters can turf him out if they disagree.
But it is deceitful to hide his true agenda under the guise of tax cuts and tax-free investments.
The wimps in the three opposition parties seem afraid to tackle this issue, or are blinded by public opinion polls.

Ron Walter can be reached at 691-1264.