Irrespective of which party wins the Federal election next week, Canadians are likely to get some tax cuts. All the main parties (including the NDP!) are promising to cut our onerous tax burden. KPMG Canada has a nice summary of the parties’ tax policies available here.

I am still surprised that the Liberals have a much better plan to cut (income) taxes than the Tories (though the Tory promise to cut the GST is politically popular). It is harder still to believe how left leaning the Tory platform is (I would have guessed that a promise like, “introduce a non-refundable 16% federal tax credit for the cost of public transit”, would be in a NDP platform). In the last election, the Conservative party had a much better fiscal plan:

  1. Phase out the 22% tax bracket on taxable income between $35K-$70K, saving a taxpayer earning $50K about $1,000 every year.
  2. Eliminate the annual surplus in the Employment Insurance program by reducing premiums.
  3. Introduce a new Registered Lifetime Savings Plan, to which Canadians can contribute up to $5,000 per year. Contributions are not tax deductible, but withdrawals are tax-free.

It is a shame that there is no radical plan to improve our anaemic productivity growth in the Conservative platform.

Attention Bloggers: I will be hosting the Carnival of Debt Reduction on Monday, January 23rd and the Festival of Frugality on Tuesday, January 24th. Deadlines are 6 p.m. EST on the previous. Please send in your submissions to ccapitalist-at-yahoo-dot-ca.

This article has 11 comments

  1. The problem I had with point #1 is when I ran a few rough calcs my numbers didn’t match theirs.
    From the 2004 platform:

    “We will phase out the 22 percent tax bracket on taxable income between
    $35K and $70K. All other brackets will be raised at one percent above the inflation
    rate. A taxpayer earning $50,000 per year will save about $1,000 per year on his or
    her taxes when the cut is fully implemented.”

    So the way I understood this was that the 16% and 22% brackets would be combined in to a new bracket at 16% + rate of inflation + 1%. If inflation is 2% that turns this new bracket into a 19% one.

    Someone making $50000:

    (35000-8100 Basic personal) * 16 % = 4300
    (50000-35000) * 22% = 3300
    total : 7600

    (50000-8100) * 19% = 7961

    This looks like an increase to me.

    Raising the basic personal exemption and cutting the rate on the lower brackets affect everyone except those already under the current basic amount.

  2. Stephan:

    When they say “all other tax brackets will be raised at one percent above inflation,” then mean raising the bracket levels, not that taxation rates. So for example, 35k becomes 35k*(1+0.04). Inflation is an annualized rate. Imagine raising the tax rate by 3% annually as you did above. Eventually the tax rate would rise above 100%!

    Also, I understand it as making one large bracket at 16% and the next highest bracket would be 26% starting at 70k*(1.04).

  3. Canadian Capitalist

    Stephan: My understanding is the same as Dave. Actually, current bracket levels are indexed to inflation (if you look at the tax form they increase a bit every year). The Tories had a plan to increase bracket levels more aggressively. And yes, they planned one big 16% level and the next tax bracket would have jumped to 26% at $70K. It was a good plan and I don’t know why they are not running on it now. But then again, they lost the last election, so their platform is a moot point!

  4. My understanding came from 2 different candidates as well as the explanations I got from their “people”. I’m not sure which is worse, a plan I’m not sure of or candidates that don’t know or understand their own platform enough to expain it to me. And they wonder why voter turnouts are low.

    A fifth or sixth explanation (I can’t remember) I got was that the rate would go from 16% to

    16% +((inflation * .16)+1)

    using 2% inflation:
    16 + (2% * .16)+1)

    16 + ((.32)+1)= 17.32%

    Still an increase. They pissed me off so much I voted my $1.75 to go to the Greens. LOL

  5. Canadian Capitalist

    Stephan: No wonder they didn’t win the last election, if their own candidate cannot explain their platforms.

    I am pretty sure that there was no plan to increase the 16% slab. For example, take someone earning $30K paying a 16% marginal tax. If a government comes along and says they are gonna increase their taxes because they are giving people earning more a tax cut, they will be pretty mad. That’s like robbing the poor and giving to the rich and no party can survive the fallout.

  6. Just wondering why the KPMG site doesn’t list the Green Party tax policy? But it includes the Bloc which has no candidates running outside of Quebec. I find this very perplexing.

  7. Canadian Capitalist

    Rob Carrick, doesn’t like the GST cut much either.

  8. I’m all for people keeping more of the money they earn. Why can’t they just make it a simple flat-tax? That way everybody pays the same rate and fairness is ensured.

  9. I agree with Bill. A person making 50k a year at a 15% tax rate pays $7500. A person making a million dollars a year at a 15% tax rate pays $150,000. He/she still pays more but the rate is the same. This is fare. Do all you populist who embrace class warfare get this point?

  10. I also agree with you Bill. Flat-tax is quite fare and moreover it is motivating. You want to earn more as you know that money you have to pay to government will not increase by growing income. As I can recomend you, there is 2008 Canadian income tax calculator where you can calculate your tax payable, according to your income. Moreover, you can compare tax rates and your after-tax income.

  11. A flat tax is a fair and equitable way for everybody to share the burden of government.