Finance Minister Jim Flaherty points to his government’s new tax-free savings account as a salve for those stung by the lack of changes to capital gains taxes in last night’s federal budget.

“This is a major structural change in the Canadian tax system, including capital gains,” Flaherty told reporters today in Toronto. “Capital gains going forward, when they are protected in a tax-free savings account (TFSA), will not be taxed.”

The TFSA, which will start in 2009, allows Canadians to save $5,000 in a tax-free account. It is similar to an RRSP except money put in is taxed going in but free of tax when withdrawn. All investment income, losses and gains generated from investments held within a TFSA are exempt from tax and not taxed when withdrawn.

The Conservative government promised capital gains measures in its federal election campaign in 2006.

While many on Bay Street were disappointed by the absence of capital gains measures, some economists say the alternative is a positive one. “Despite the absence of direct capital gains relief, the budget should be greeted favourably by Canadian investors, as the tax-free savings accounts offer a new, flexible alternative,” wrote Douglas Porter and Robert Kavcic, from BMO Capital Markets in a budget analysis.

RBC economists said any measures that promote savings are welcomed, but went on to question whether the new TFSA will, in fact, boost nest eggs. “One likely outcome is that contribution room may well be used up by gradually sweeping non-tax sheltered savings across to this new tax sheltered account and thereby have no material impact on saving tendencies,” wrote RBC chief economist Paul Ferley and his colleague, Derek Holt. “The other reason why it may not boost savings over the long haul is that no restrictions on when and how funds can be redeployed make it more of a deferred consumption vehicle subsidized by tax revenue dollars.”

RBC also noted the move provided a bit of political shelter for the current government. “This new plan also allows the federal government to claim a victory by way of delivering on its plans for sheltering investment income, including capital gains.”

In a breakfast speech this morning at Toronto’s Royal York Hotel, Flaherty likened introduction of the TFSA to the 1957 launch of the RRSP system “which we all sort of take for granted now.”

“I know it’s going to take awhile for the importance of this initiative to strike people,” he said. “We’re doing it to encourage savings in Canada.”

Flaherty pointed out that both the U.S. and U.K. already have these kinds of saving accounts, in which people can accumulate tax-free dividends, capital gains and interest. “I tell you Warren Buffet would love this. It’s the miracle of compound interest, tax-free.”

Flaherty said he estimates that 90% of Canadian savings will be tax-free within the next 10 to 20 years.

The finance minister said he doesn’t anticipate taking any further tax measures in the near term. “We’re in a time of economic slowness in the United States. We’re not an island. We’re part of the global economy,” he said. “That’s why we’re taking a prudent cautious, responsible approach now in our budgeting as we have in the past.”

As for the future of the capital gains: “I would hope that we could do more in the future on that. Never is a big word.”