RESPs are already the best way to save for a child’s education. In most instances, a RESP beats out other alternatives – it is better than a RRSP, it will be better than the TFSA and it is certainly better than saving in a taxable account. Bill C-253 introduced by MP Dan McTeague proposes to change the RESP by allowing taxpayers a deduction of $5,000 on their taxes but the bill is very vague in its current form. It is not clear if the tax deduction will take the place of the CESG. No details are available on whether contributions will now be taxed in the hands of the student. Which in turn, raises the question on how contributions already made to the RESP will be treated.
I do have serious doubts on whether the RESP will ever be changed such that a tax deduction will be allowed on contributions, while keeping the existing grants and rules. Not surprisingly, the Conservative government takes the view that the bill is “irresponsible” and “ridiculous” and an “abuse” of the process and included a new clause aiming to quash the bill as part of its budget motion that will be voted on today. The Liberals, the only other party with any hope of forming a government, have indicated how serious they are about Bill C-253 by planning to let the budget motion pass. But more tellingly, Don Martin wrote in the National Post yesterday that according to Liberal insiders, their campaign platform will feature a “scaled-down version of MP Dan McTeague’s registered education savings scheme”. Why scale it down? Let me guess: it’s too good to be true. And politicians wonder why they get no respect.