Actually, this federal government has raised taxes on Canada’s middle class
Last week, the Trudeau government announced it will soon increase the Canada Child Benefit, a tax-free monthly payment to eligible families. It’s now clear the government has abandoned its promise to provide tax relief to middle-class families—and it continues to confuse government transfers with taxes, something that should worry all Canadians.
Since taking office in 2015, Prime Minister Trudeau has repeatedly claimed to have lowered taxes for the middle class, pointing to the second-lowest personal income tax rate, which the government reduced from 22 per cent to 20.5 per cent. But crucially, the government also simultaneously eliminated several tax credits including the children’s fitness tax credit, public transit tax credits and the income-splitting tax credit for couples with young children.
Consequently, the elimination of these tax credits resulted in higher personal income taxes. In fact, when you compare the value of Trudeau’s tax rate reduction with the loss of tax credits, 81 per cent of middle-class families (with household incomes between $77,089 and $107,624) experienced an increase in their federal tax burden since 2015. In other words, slightly more than four out of five middle-class families now face a higher tax burden.
When confronted with these findings, the government and advocates for its policies shifted from their original goal—reducing taxes so middle-class families could keep more of their money—to a policy where families receive more income (the Canada Child Benefit, for example) from other Canadians (remember, your tax dollars pay for these benefits). This shift in policy conflates taxes and transfers.
Here’s why. Tax cuts allow Canadians to keep more of their own income and strengthen the incentives for work effort, investing in training and education, and entrepreneurship. Conversely, increasing the value or volume of government transfers makes Canadians more dependent on government and other people’s money.
Moreover, the latest increase to the Canada Child Benefit (CCB) means families could receive up to an additional $143 per child under the age of six and $121 per child between the ages of six and 17, compared to what they received last year.
However, the federal budget deficit will reach a projected $19.8 billion in 2019/20, which means the federal government must borrow money to pay for the CCB increase. The result is more government debt and higher debt interest payments—again, paid for by taxpayers. Incidentally, since the Trudeau government took office, the per person federal debt (inflation-adjusted) has increased by $1,725.
Finally, it’s important to understand that today’s Canadian families will enjoy benefits that future families will pay for, when those future generations face higher taxes to finance today’s expenditures. Put differently, the government is borrowing money from young Canadians, hoping they don’t notice, and guaranteeing them a huge bill to pay in the future.
With the CCB increases, the federal government will add to the debt burden via another spending increase. And with this latest expansion of government transfers, the goal posts have been shifted again, and the promise of tax reductions for middle-class families has been abandoned. Canadians pay more taxes today than they did four years ago. And many Canadians are becoming more dependent on government and other people’s money.
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