Canadians are about two weeks away from finding out which of Prime Minister Justin Trudeau’s election promises will come to fruition first and when, as Parliament is scheduled to resume on Dec. 3. A tax bill is expected to be introduced shortly thereafter.
It’s likely that the government’s first priority will be to cut the middle income tax bracket, which affects Canadians with taxable annual income between $44,701 and $89,401, to 20.5 per cent from 22 per cent.
But just how many Canadians will benefit from the middle-income tax cut?
For starters, we can eliminate anyone with an income below $45,000. Using the Canada Revenue Agency’s most recent tax filing data and income statistics for the 2012 tax year, we know that 26.7 million tax returns were filed that year out of a population of about 35 million (since most children don’t file tax returns.) Of those that did file returns, 17.6 million of them — 66 per cent — had income below $45,000 and won’t benefit at all from the tax cut.
The nine million Canadians with income above $45,000 will all benefit from the middle-income tax cut, thanks to Canada’s progressive tax system. But what about Canada’s top income earners?
To pay for the middle-income tax cut, the Liberals are proposing to introduce a new tax bracket of 33 per cent for individuals earning more than $200,000 annually. The current top federal bracket of 29 per cent affects individuals making taxable income over $138,586. When you take into account the fact that these high-income earners will also benefit from the middle-income tax cut, the new four per cent tax increase will be felt once taxable income exceeds about $217,000.
Source: Financial Post