Federal tax changes, looming CPP tax hike mean higher taxes for virtually all Canadian families

Printer-friendly version
Appeared in the Ottawa Sun, January 15, 2018

The Trudeau government likes to talk a lot about families. Indeed, the words “family” and “families” appeared nearly 250 times in last year’s budget, and we can expect similar enthusiasm for families in the upcoming budget. One way Ottawa aims to support its pro-family rhetoric is by claiming to cut taxes for middle-class Canadian families “everywhere.”

But this claim is based on just one particular federal tax change—the reduction in the second lowest personal income tax rate (from 22 to 20.5 per cent). Since coming to power in 2015, the Trudeau government has enacted or spearheaded a host of other tax changes that increase the tax burden on families. In fact, virtually all Canadian families with children will soon pay higher taxes because of tax changes the federal government has introduced or initiated with the provinces.

For starters, the Trudeau government has made several major changes to the personal income tax system beyond the rate cut noted above. For instance, it eliminated various tax credits including income-splitting for families with children, the children’s fitness tax credit, the public transit tax credit, the education tax credit and the textbook tax credit.

The elimination of these tax credits means the vast majority of families with children will pay higher personal income taxes—despite the cut to the second lowest personal income tax rate. In other words, the increase in taxes from eliminating tax credits was greater than the decrease in taxes from the rate cut.

But it doesn’t end there.

One year from now, working Canadian families will experience the first of seven annual increases to the Canada Pension Plan (CPP) tax. By 2023, the combined employer and employee tax rate will increase from 9.9 per cent to 11.9 per cent on eligible earnings (up to $55,900 in 2018). An additional tax of 8 per cent will come into effect in 2025 and apply to earnings up to 14 per cent above the traditional threshold—which would be $63,726 if implemented in 2018.

This CPP tax hike was partly spearheaded by the Trudeau government, although it required approval from the provinces.

And what’s the result? Higher taxes for virtually all Canadian families.

Indeed, a fully implemented CPP, on top of personal income tax changes, means 92.2 per cent of Canadian families with children would pay higher taxes. And those nine-in-10 families will pay, on average, $2,218 more per year. The increased CPP tax alone translates into $1,624 more in taxes.

Of course, the middle class is often the focus when the Trudeau government talks about cutting taxes for families. Yet middle-income families (those with family incomes between $77,839 and $110,201) are particularly hard hit by the CPP tax hike and federal income tax changes. Almost every middle-income family (98.8 per cent) will pay higher taxes with the fully implemented tax hike.

While the Trudeau government likes to talk about cutting taxes for families, in reality it has led the charge in raising taxes for almost every Canadian family.

Subscribe to the Fraser Institute

Get the latest news from the Fraser Institute on the latest research studies, news and events.