I was unaware that Canada and Britain have implemented tax-free savings accounts (TFSAs). In Britain they call them Individual Savings Accounts (ISAs), a much less descriptive name. The concept is like the Roth IRA, in that the contributions to the account are not deductible for income tax purposes, but once in the account, the earnings on those funds are never taxed. Unlike the Roth IRA, funds can be withdrawn for any purpose.
Is this a good idea? I don’t have a definite opinion yet. After thinking about it for maybe thirty seconds, I doubt that it would have much of an impact on income taxes if the accounts were limited to bank deposits, because they pay so little interest nowadays anyway.
A recent post on the Cato Institute’s blog has a good discussion of the basic concept.
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