federal personal income tax

Federal tax changes, looming CPP tax hike mean higher taxes for virtually all Canadian families

Nine-in-10 Canadian families with children will pay, on average, $2,218 more per year.

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The Effect on Canadian Families of Changes to Federal Income Tax and CPP Payroll Tax


  • Since coming into office, Prime Minister Justin Trudeau’s government has repeatedly claimed to have reduced taxes for middle class Canadian families—a claim based solely on the federal government’s reduction to the second lowest personal income tax rate from 22 to 20.5 percent. However, a recent study found that when all the Trudeau government’s major changes to the personal income tax system are properly accounted for (including the elimina­tion of income splitting and other tax credits), income taxes have been raised, not lowered, on the vast majority (81 percent) of middle income Canadian families.
  • In addition to enacting changes to the personal income tax system, the federal gov­ernment has also announced other significant tax changes that will take effect in the com­ing years. For instance, payroll taxes will be increased to fund an expansion of the Canada Pension Plan (CPP), with the first increase tak­ing place in January 2019. The dramatic in­crease in the CPP payroll tax, which was a joint venture with the provinces but initiated largely by the federal government, will be fully imple­mented in 2025. This raises the prospect of even more middle income families in Canada paying higher taxes beyond what the changes to the federal income tax system would alone indicate.
  • This report measures the impact of the fed­eral government’s personal income tax chang­es and the fully implemented CPP payroll tax increase on the amount of taxes that Canadian families will pay. (A family is defined as a parent or parents with a child or children under age 18.) It finds that once fully implemented, virtually all (98.8 percent) of middle income Canadian fami­lies with children (with incomes ranging from $77,839 to $110,201) will pay higher taxes. And they will pay, on average, $2,260 more tax each year.
  • In fact, when looking at all 2.988 million families with children in Canada (excluding those in Quebec), 2.756 million, or 92.2 percent, will pay higher taxes—$2,218 more, on average, each year. Indeed, once the increase in CPP pay­roll taxes is fully implemented, nearly all Cana­dian families—regardless of where they stand in the income distribution—will pay higher taxes.

Canada’s health-care system fails to account for senior migration

Almost three-quarters of Canada’s total tax burden is paid by the working-age population.

Seniors migration cost British Columbia $7.2 billion in health-care expenses

Average per person spending on health care for Canadians over 70 is $13,797.

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The Impact of Interprovincial Migration of Seniors on Provincial Health Care Spending


  • The dominant role played by government financing in Canada’s single-payer health care system has led to an oversight related to demographics: senior migration.
  • Health care spending is skewed towards the first year of life and after retirement. The average amount spent on health care by governments in a person’s first year of life is $10,800. For those between the ages of 65 to 69, that amount is $6,424, but it rises to $13,797 for those over 70.
  • Taxes, on the other hand, start out quite low and then climb steadily to one’s prime earning years (56-63), before beginning to decline as one nears and then enters retirement.
  • When a senior migrates from one province to another, they are likely to have paid the bulk of their lifetime taxes in one province but will consume the majority of their health care in another.
  • Six provinces experienced a net inflow of seniors between 1980 and 2016: BC, AB, ON, NB, NS, and PEI. The remaining four provinces (SK, MB, QC, and NL) experienced a net outflow of seniors. British Columbia recorded the greatest inflow (40,512), while Quebec experienced the greatest outflow (37,305).
  • Based on average annual health care costs by age, British Columbia had the largest cost at $7.2 billion (in 2017 dollars) while Quebec had the largest savings at $6.0 billion.
  • A partial analysis of potential tax revenues provided by migrating seniors suggests that BC’s costs could have been mitigated by as much as 36.3 percent while Quebec’s savings could have been reduced by as much as 19.2 percent.

Prime Minister Trudeau thinks Canadians achieve better lives through government dependence

If families who receive CCB transfers begin to earn a higher income, their cash transfers will be reduced—a disincentive to hard work.

In Ontario, obstacles to growth remain

The province’s top earners face a tax rate of 53.5 per cent on any additional earnings.

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Measuring the Impact of Federal Personal Income Tax Changes on Middle Income Canadian Families

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  • During the 2015 federal election campaign, the Liberals pledged to cut income taxes on Canada’s middle class. Since coming into office, the government has repeatedly claimed that it has delivered on this commitment. While the federal government did reduce the second lowest federal personal income tax rate, it also simultaneously introduced several other broader changes to the federal personal income tax system.
  • For instance, it introduced a new, higher top income tax rate and eliminated several tax credits, which had the effect of increasing taxes on Canadian families who previously claimed those credits. In fact, the elimination of many tax credits may partially, or even completely, offset the tax rate reduction targeted at middle class families.
  • This paper measures the net overall effect that the federal government’s changes to the personal income tax system have had on the amount of tax that Canadian families with children pay. It finds the federal government’s income tax changes have resulted in 60 percent of the 3.88 million families with children covered in this paper (representing 13.9 million individuals), paying more in taxes. The average tax increase amounts to $1,151 each year.
  • Among middle income families—the group of families the federal government claims to want to help—81 percent are paying more in taxes as a result of the federal income tax changes. The average income tax increase for this group of middle income families is $840.
  • For the subset of middle income families consisting of couples with children, an even greater share (89 percent) pays higher income taxes ($919 on average).
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