Ontario’s low-income tax credit gives fewer benefits than minimum-wage hike, watchdog says

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TheGlobeandMail.com – Canada

The Ontario government’s new low-income tax credit provides fewer benefits than the cancelled minimum-wage increase, and will add $1.9-billion to the deficit, according to a new report from the province’s fiscal watchdog.

In a report released Tuesday, Financial Accountability Officer Peter Weltman found that Ontario’s new Low-Income Individuals and Families Tax Credit (LIFT) provides less money to fewer people than a planned increase to the province’s minimum wage would have. On average, minimum-wage workers will receive about $400 less per year under the new plan, the report says.

“Ultimately what we found was, under an increased minimum-wage situation, more people would get a higher benefit versus the LIFT credit,” Mr. Weltman said.

“The LIFT credit, however, is more focused or more specifically targeted to those low-income individuals.”

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The report also found that, due to lost provincial tax revenue from cancelling the minimum-wage increase combined with the cost of the LIFT credit, the province’s pocketbook will worsen by $1.9-billion over the next four years.

However, the report noted that the LIFT credit does not impose direct costs on businesses, which could have impacted employment, as well as increased prices.

The Progressive Conservative government announced last fall that it was halting a planned increase to the minimum wage that was scheduled to kick in this year, following up on a promise made during the spring election campaign.

Ontario’s minimum wage remains at $14 an hour rather than rising to $15 as planned by the previous Liberal government.

In November’s fiscal update, the government announced the new tax cut for low-income workers making less than $30,000 a year, a variation on Ontario Premier Doug Ford’s election promise to end income taxes to every worker making minimum wage.

The report says of the 2.9 million people making less than $38,500 a year, some one million would benefit from the LIFT credit. On average, they will receive $409 this year. Only 19,000 people will receive the maximum $850.

Under the proposed minimum-wage increase, 1.3 million people would have benefited, and received a net after-tax benefit of $810, the report said.

The LIFT credit also increases the proportion of those making less than $30,000 a year who do not pay provincial income tax from 78 to 90 per cent.

https://www.theglobeandmail.com/canada/article-ontarios-low-income-tax-credit-gives-fewer-benefits-than-minimum-wage/

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