Fraser Forum

Reality undercuts Trudeau government’s tax-cutting claim

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There’s no doubt that Prime Minister Justin Trudeau is being asked some tough questions on his current cross-country town hall tour. But a recent study on taxation raises yet another critical question for the prime minister.

For a government that has steadfastly claimed to cut taxes on Canadian families—and in particular middle-class families—the results are eye-opening. Contrary to Ottawa’s rhetoric about cutting taxes, the analysis shows that virtually all Canadian families with children will soon pay higher taxes because of tax changes the Trudeau government has introduced or initiated with the provinces.

Let’s start with the basis of the Trudeau government’s tax-cutting claim, which is based on just one particular federal tax change—the reduction in the second lowest personal income tax rate (from 22 per cent to 20.5 per cent). However, 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.

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. For many families, the increase in taxes from eliminating these tax credits was greater than the decrease in taxes from the rate cut.

But the tax increases won’t end there.

One year from now, working Canadians 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.

According to the study mentioned above, a fully implemented CPP, on top of personal income tax changes already in place, means 92.2 per cent of Canadian families with children would pay higher taxes. And they will pay, on average, $2,218 more per year. The increased CPP tax alone translates into $1,624 more in taxes.

With more than nine-of-10 families paying higher taxes—regardless of income—it would seem the prime minister has some explaining to do.


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