According to Prime Minister Trudeau, redistribution is the new ‘tax relief’
Canadians don’t always pay attention to the daily ritual of question period on Parliament Hill. But sometimes the government’s comments can be revealing in unexpected ways.
In an exchange on Tuesday, Opposition leader Andrew Scheer asked Prime Minister Trudeau about a study measuring the federal income tax increases on middle-class families. Trudeau’s response was illuminating, but likely not in the way he intended. It’s now clear that the federal government’s concept of “tax relief” goes far beyond reducing taxes and includes large-scale income redistribution.
To understand Trudeau’s response, first consider the findings of the study in question.
The Trudeau government has repeatedly asserted that it has lowered income taxes on middle-class families. A quick Google search for the terms “Trudeau” and “tax cuts for middle class families” returns more than 185,000 results after less than a second.
While it’s true the Trudeau government reduced the second-lowest personal income tax rate from 22 per cent to 20.5 per cent (which applies to individual incomes between $45,916 and $91,831), the government also eliminated a number of tax credits (provisions in the tax code that reduce a person’s income taxes if they qualify), thereby increasing income taxes for Canadians who previously claimed such credits.
Specifically, the government eliminated the income-splitting tax credit for couples with young children, the children’s fitness tax credit, the public transit tax credit, the education tax credit and the textbook tax credit.
When all the income tax changes are considered, more than 8-in-10 middle-class Canadian families—defined as families with incomes between $77,089 and $107,624—are paying more in personal income taxes because of the Trudeau government’s tax changes.
For these middle-class families, the largest tax increase comes from eliminating income-splitting. This tax hike alone, which averages $949, more than offsets the average $228 tax reduction achieved when the government cut the second lowest tax rate. Once the other eliminated tax credits are accounted for, middle-class families will pay $840 (on average) more in income taxes this year.
Tellingly, when asked about the clear contradiction between the government’s rhetoric (middle-class families paying less in taxes) and the reality of the government’s tax changes (which actually increase the middle-class income tax burden), Prime Minister Trudeau did not deny that middle-class families are paying higher income taxes.
Instead, he said the study ignored the Canada Child Benefit (CCB), a new transfer to qualifying parents with young children that combined several previous programs and increased the payment amount.
Most Canadians understand “tax relief” to mean that we get to keep more of the income we earn. Apparently, when the prime minister and his finance minister talk of tax relief, they mean something different.
In the House of Commons on Tuesday, the prime minister clearly accepted that many middle-class Canadians are now paying more taxes but his justification was that these tax increases were offset by the new, expanded transfer payment.
In other words, he sees tax relief (i.e. keeping more of what we earn) the same as government transfers (i.e. the government taxes us more and decides who receives the new transfer). It’s an extraordinary admission by the government—that middle-class Canadians are better off being more dependent on government transfers than if they get to keep more of their earnings.
Remarkably, in the prime minister’s eyes, redistribution is the new tax relief.