A new report suggests federal changes will increase middle-income households’ tax burden
The federal government’s rhetoric has been one supportive of middle-class households. But a new survey suggests that recent changes from Ottawa will actually increase their overall tax burden.
According to a new study from the Fraser Institute titled Measuring the Impact of Federal Personal Income Tax Changes on Middle Income Canadian Families, Canadian families will pay an average of $840 more in federal income taxes this year because of a slew of changes by the government.
“[T]aking their major income tax changes into account, they've actually raised taxes on the vast majority of middle-class families,” said Charles Lammam, director of fiscal studies and co-author of the study.
The federal government reduced the second-lowest federal personal income-tax rate from 22% to 20.5%. However, it also introduced a higher top income-tax rate and eliminated credits such as income-splitting for couples with young children, the children’s fitness tax credit, the education tax credit, the textbook tax credit and the public transit tax credit.
Using figures on number of households and household income from Statistics Canada, the researchers looked at families with children that fall into five different income ranges. Overall, the researchers found that 60% of all Canadian families with children are paying more income tax than before due to the federal government’s changes over the past couple of years. Among those paying more income tax, the average annual increase was $1,151.
They also found that that Ottawa’s changes will increase income taxes for 81% of middle-class Canadian families — which they defined as those with incomes between $77,089 and $107,624 — that have children (counting both single-parent and two-parent households). This was the hardest-hit group based on the analysis.
“Contrary to the federal government’s claims, the overwhelming majority of middle income families are paying more in personal income tax as a result of the personal income tax changes,” the researchers said in the report.
The tax changes were also found to result in increased income taxes for 67% of upper middle-income households with children (earning $107,625 - $150,384) and 69% of lower middle-income households with children (earning $51,699 - $77,088).
The researchers also determined that couples with children are taking a harder financial hit than their single counterparts. “[G]enerally, 67% of all couples with children are paying more income tax because of the federal government’s tax changes,” the researchers said. “This compares to 60% of all families with children.”
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The unintended impact of the government’s tax proposals
Canadians expecting hard hit from rate hikes
According to a new study from the Fraser Institute titled Measuring the Impact of Federal Personal Income Tax Changes on Middle Income Canadian Families, Canadian families will pay an average of $840 more in federal income taxes this year because of a slew of changes by the government.
“[T]aking their major income tax changes into account, they've actually raised taxes on the vast majority of middle-class families,” said Charles Lammam, director of fiscal studies and co-author of the study.
The federal government reduced the second-lowest federal personal income-tax rate from 22% to 20.5%. However, it also introduced a higher top income-tax rate and eliminated credits such as income-splitting for couples with young children, the children’s fitness tax credit, the education tax credit, the textbook tax credit and the public transit tax credit.
Using figures on number of households and household income from Statistics Canada, the researchers looked at families with children that fall into five different income ranges. Overall, the researchers found that 60% of all Canadian families with children are paying more income tax than before due to the federal government’s changes over the past couple of years. Among those paying more income tax, the average annual increase was $1,151.
They also found that that Ottawa’s changes will increase income taxes for 81% of middle-class Canadian families — which they defined as those with incomes between $77,089 and $107,624 — that have children (counting both single-parent and two-parent households). This was the hardest-hit group based on the analysis.
“Contrary to the federal government’s claims, the overwhelming majority of middle income families are paying more in personal income tax as a result of the personal income tax changes,” the researchers said in the report.
The tax changes were also found to result in increased income taxes for 67% of upper middle-income households with children (earning $107,625 - $150,384) and 69% of lower middle-income households with children (earning $51,699 - $77,088).
The researchers also determined that couples with children are taking a harder financial hit than their single counterparts. “[G]enerally, 67% of all couples with children are paying more income tax because of the federal government’s tax changes,” the researchers said. “This compares to 60% of all families with children.”
For more of Wealth Professional's latest industry news, click here.
Related stories:
The unintended impact of the government’s tax proposals
Canadians expecting hard hit from rate hikes
