Yes, Prime Minister (home renovation episode)

Thank you, Jim Flaherty and Stephen Harper. I just finished the first leg of a long-contemplated kitchen renovation that got pushed over the top by February’s federal budget tax credit for home renovations. This year only! Act now before it is too late!

The credit is worth a maximum of $1,350 per family if you spent a full $10,000 or more on the project. In my case, all tallied up the credit will be worth only about $375 (the first $1,000 is exempt). Like much of federal and provincial tax policy in recent years, I have been reaping windfalls though I am not particularly needing the cash. Still, I am not a free rider, either.

And I’m doing my part for the Canadian economic stimulus plan, though my three trips to Ikea make me think that maybe Sweden is getting the better end of this renovation bargain. I (with some family help) have done most of the work so far myself: set up a kitchen-in-exile in a corner of the living room, tore out the old kitchen, built the cabinets, leveled, screwed, adjusted, leveled again, destroyed at least one piece of wood trying to do fine cuts on a table saw, assembled drawers. About five days worth of work for me on my “vacation.” And it has been fun.

As for other employment generated, there is some but not a lot. The folks at Ikea, one of whom spent an hour with us placing the order. The countertops are being done next week, and there is about six hours of work required (contrary to my budget-time quip that the home reno credit was marble countertops for the middle class, we decided in favour of the lower cost laminate). Add another day’s work for a contractor to do our floors (if you are looking for a guy in Vancouver …). Call it two days of work, about $175 per day in tax credits for me to generate that incremental labour.

It will be interesting to assess the full economic impact of the credit and multipliers when all is said and done. It is estimated to be a $3 billion tax expenditure, a lot of money compared to other potential uses. But if there are lots of others out there on the bubble like me, the tax credit may turn out to be a shrewd move that is preventing a bad situation in construction employment from being much worse.

OK, now back to my real vacation.

6 comments

  • Yeah, too bad that haven’t actually passed the legialation to put the credit in place yet.

  • Home reno’s tax breaks its the kinda advice you get when you go to Home Depo for advice on the economy during a recession as Flatherty checks with the experts at Home Depo. Makes you wonder how thats going to help the economy or better yet the pockets of Home Depo and Rona for sure as the unemploymed are left to go without.

  • Laminate??!! You mean the tax I pay on my cigarettes are going to subsidise laminate. Now there is a real reason to quit smoking.

  • charlie, the Ways & Means motion that sketched out the rough idea of how the HRTC would operate was passed way back when the budget was passed.

    The enabling legislation will come in the fall.

    Just as the drop in the lowest tax bracket to 15% in the November 2005 fiscal update wasn’t passed into law before becoming effective (the Harper gov’t brought in the enabling legislation for it in early 2006, long after CRA had printed, actually re-printed, the revised forms with the 15% tax bracket number). In that case though, I’ll have to look to see whether the W&M motion for that measure was actually passed, b/c then that’d definitely be cart before the horse stuff.

  • Yes, the W&M motion to drop the bottom tax bracket to 15% was approved in Parliament on Nov. 23rd, 2005 (it was introduced in the House midday on Nov. 14th, the day of the Fiscal Update), just 5 days before the non-confidence vote which ended that Parliament.

    See here:

    http://tinyurl.com/parl-journal-nov23-2005

    under the first “Ways and Means” heading, Division no. 185.

  • Who ever drew up this tax credit sure had a fine grasp on cultural constructed political advertising and tax breaks.

    I have never seen a tax break with such a minor impact be marketed to the public in such a holistic by the entire spectrum of the business community. It is just amazing how much free advertising the corporate world has given Harper. Other parties need to take note on how to design and market such a ultra targeted – middle income tax break and get the full exposure for such a long long time. That tax break just keeps on giving and giving to Harper.

    Quite an effective beast for publicity but as an economic stimulus my estimate would be minimal at best. Construction employment is in free fall, and I have yet to see a sawmill open. In fact the forestry companies are still closing to shrink supply and boost prices.

    paul

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