Thursday, March 16, 2017

How to Kill US Gerrymandering

One of the most objectionable and undemocratic characteristics of American government is legalized gerrymandering.  Gerrymandering is defined as "the dividing of a state, county, etc., into election districts so as to give one political party a majority in many districts while concentrating the voting strength of the other party into as few districts as possible."  Basically, the votes of the minority are devalued further by grouping them into districts that give them as little representation as possible.  One person's vote is worth less than another - NOT democracy.

I lived in a gerrymandered district in Virginia.  It was drawn up by the Republican state legislature to guarantee a Republican federal representative, and it has delivered this result for over 35 years, in spite of the fact that the area voted for Obama twice and Clinton in the last election.  You can see that it was drawn to guarantee a result by looking at the map, which is carefully drawn to ensure enough Republicans to elect a Republican federal representative.  The map does not follow logical geographic, municipal, or any other boundaries.
Virginia 10th District, courtesy Wikipedia

Many districts in many states are like this, and they favor the right or the left depending on who owns the state government.

How to defeat this undemocratic abomination?

Answer: vote in the primary of the party that always wins the district.  Since the district is guaranteed to go to a particular party, your only choice is in the primary election of that party. Do you want a more moderate representative or do you want the other party to choose a radical?  Of course you, the minority voter, want someone who is more moderate.  If you have to register as a supporter of the other party to vote in the primary, do so.  It costs nothing and does not bind you to vote for them in the general election.  Also, what is the point of voting in the primary for your party?  They are going to lose anyway.

If enough people do this, you will get a more moderate candidate for the favored party.  A Republican who does not want to eliminate Social Security and Medicare or a Democrat who does not want to outlaw cars and turn the roads into Kale farms.

So this is my idea to improve democracy in the USA.  After the last 15 years of turmoil, we certainly need it.

Tuesday, March 14, 2017

USA to Canada - Moving Investments


This is an update to my guide to moving to Canada, covered in this post.

One of the issues with moving is getting your investments moved from the USA to Canada.  Why would you bother?

  1. The USA will consider you to still be a resident and will expect tax payments on your income.  But you now live in Canada, and the Canadian government expects payments on this same income.  Untangling this mess will take a lot of time and money from your tax accountant.
  2. Your US broker will likely kick you to the curb if they find out that you moved out of the USA.  They will quickly close your account and you will have to scramble fast to get the investments moved.  If you don't move the investments before the brokerage acts, they will sell all investments with resulting capital gains that you will owe to the USA and Canada.
  3. You will not be able to claim any Canadian tax reductions on dividends as your investments are held by a US brokerage and they don't calculate Canadian tax reductions.  You will also have more paperwork to submit concerning foreign investments, just trust me on this one.
  4. NB: You actually end up with two cost bases when you move from USA to Canada:
    1. The USA considers your cost basis to be what you paid for the investments.
    2. Canada considers the cost basis to be what the investments were worth when you moved.
So how do you make this transfer?  It does depend on the investments and the US brokerage or mutual fund company you used.

  1. If you can, convert your US mutual funds to ETFs.  Vanguard will do this at no charge and with no tax consequences.
  2. If you own mutual funds that cannot be converted to ETFs, you should call your broker/mutual fund dealer where your hold the mutual funds.  Call the customer service number, do not say who you are, then ask "what happens if a person who owns mutual funds with you moves to Canada?"  You may get these replies:
    1. No problem.  This is good.  Keep the investments with them and just change your address.
    2. You can continue to hold the mutual funds, but you can only sell them for cash, no changes in investments.  This is not so good.  You have to look at the tax consequences and your investment plan.  Should I sell immediately and take a gain or loss?  If I hold the funds for a long time, will I continue to be happy with them, will they meet my diversification goals, are the fees reasonable, etc.?  Probably best to talk to your financial planner.
    3. You must sell the mutual funds.  This is bad.  Again, you need to look at the tax consequences as you may trigger large gains or losses.  Probably best to talk to your financial planner.
  3. If you own stocks, bonds, or ETFs in the USA:
    1. Open a brokerage account in Canada with the exact same owners as you have in the USA.  If it is a joint account in the USA, open a joint account in Canada, same for individual account.
    2. Call your brokerage in Canada, get the forms to transfer from a US brokerage to their brokerage, and fill them out.  Call your Canadian broker to make sure you fill the forms out correctly and that you selected a straight transfer with no tax consequences (simple transfer of securities, no buying or selling).  Make double sure that you are doing this.  Make copies and send them via registered mail or similar method to your Canadian broker.  This will cause the US brokerage to send the securities to your Canadian broker and they will appear in your account.  Expect to get phone calls from both brokerages during the process to verify information, ask questions.  Expect to call your Canadian broker to follow up if you don't hear from them, it will likely not happen automatically with no intervention by you.
    3. After the transfer is done, inform your US broker that you are a Canadian resident.  In the case of stock brokerage accounts, they will start the "kick the foreigner to the curb" process immediately. 
NB: If you are a US citizen, do not buy Canadian mutual funds or ETFs unless you are willing to submit a lot of paperwork to the US government.  These are considered PFICs (passive foreign investment company), which, for some unknown reason, the US government does not like.

Remember, you should talk to a competent financial planner before taking action.  This blog is just a single information source and a lot of information on the Internet is wrong, maybe including this blog, so do your research before taking a decision.

Photo credit: flickr