Fraser Forum

Federal tax increases draining the pockets of Canada’s middle class

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You really have to scratch your head and wonder. For a government that claims to want to cut taxes on Canada’s middle class, the Trudeau Liberals are doing a bang up job of increasing them.

The latest potential tax hike could come from higher user fees for a range of federal services (including fish licenses, campsites, and passports). That’s according to a CBC news report that suggests the federal government is eyeing an increase to such revenue sources.

Put aside whether higher user fees are warranted, the reality is that these measures, if implemented, would be the latest in the government’s suite of tax increases on Canadians.

Let’s take stock of the tax increases announced to date.

First there was the new top personal income tax rate on highly skilled and educated workers: now 33 per cent, up from 29 per cent. This tax hike will discourage economic activity and make it more difficult for Canada to attract and retain knowledge-based workers.

Of course, the government reduced the second lowest personal income tax rate from 22 per cent to 20.5 per cent, but that reduction is being completely wiped out by the higher payroll taxes working Canadians will have to pay for expansion of the Canada Pension Plan—a combined 2 per cent hike on earnings under the current limit and an additional 8 per cent above, up to a maximum.

Keep in mind that Canadians with incomes below $45,000 will be particularly hard hit, as they will not receive any benefit from the income tax rate reduction but they will have to pay higher payroll taxes.

And we mustn’t forget about the widely-used tax credits that the government is eliminating. This includes income splitting for couples with children, the Children’s Fitness Tax Credit, the Children’s Arts Tax Credit, the Education Tax Credit, and the Textbook Tax Credit (rumour is that others will be on the chopping block as well). While tax credits create distortions with little economic gain and require the maintenance of higher marginal rates, Canadians who use these credits will see their total tax bill rise from their elimination.

And then there’s Ottawa’s plan to impose carbon pricing on all the provinces, with the rate per tonne reaching $50. This tax will directly raise the cost of many consumer goods including gasoline and natural gas; it will also indirectly increase costs for many others through increased costs of production and transportation.

All of this doesn’t even begin to account for the potential for higher taxes that will be required to service and repay the substantial run up in federal debt that has taken place already and that is planned for the future.

Taken together, it’s clear that the Trudeau government is not delivering on its commitment to cut taxes on Canadians.

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