Some Implications of the Liberal Government’s Tax Changes

Posted on February 23, 2016 in Equality Debates – Publications
February 2016.   Richard Zuker

Canada’s new Liberal government recently introduced two major changes to the personal income tax system for the 2016 tax year. One implication of the tax rate decrease is that the amount of the tax saving increases with taxable income in the targeted tax bracket. While the tax reduction was touted as a tax benefit for the ‘middle class,’ the maximum benefit of $679 also extends to every taxpayer with a taxable income greater than $90,563. One quick fix is to increase the marginal tax rate in the 26 percent tax bracket by 1 percentage point, to 27 percent. Another problem: Because tax reductions are based on the taxable income of individuals, they can have uneven impacts when considered from the perspective of family units. Finally, lower-income Canadians who are excluded from the tax reduction are slated to benefit from the planned increases in child benefits. But the proposed increases in child benefits are greater for middle-income than lower-income families.

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