The centrepiece measures are changes to income tax rates, with a reduction on the tax rate for income earned between $45,282 and $90,563, which drops from 22 per cent to 20.5 per cent, while a new tax bracket will apply on income over $200,000, raising the rate from 29 per cent to 33 per cent. The Family Tax Cut, which allowed couples with children under 18 to split their income resulting in a tax credit of up to $2,000, has also been eliminated. Additionally, the Universal Child Care Benefit (UCCB) will be replaced with the Canada Child Benefit (CCB) starting in July 2016. The CCB differs from the UCCB in that it is tax-free, and means-tested with larger payouts going to lower-income households.
As part of its annual New Year’s Tax Changes report, the CTF has calculated the tax impact for families for 2016 for 34 hypothetical Canadian households. Some highlights include:
- $1,597 in savings for a two-child, single-income family in Ontario earning $30,000 per year.
- $1,414 in savings for a two-child, two-income family in Saskatchewan earning $80,000 per year.
- $164 in savings for a two-child, one-income family in Quebec earning $100,000 per year.
- $7,643 in higher taxes for a two-child, one-income family in Alberta earning $250,000 per year.
“The range varies widely, from a few hundred to about $2,000 in savings, but it’s clear that most Canadian families will have more money in their pockets as a result of these tax changes,” said CTF Federal Director Aaron Wudrick. “Dual-income households with children, where each spouse earns a relatively equal amount, will benefit most.”
Wudrick also noted that for all the good news, high-income earners face substantial tax hikes, while the rollback of Tax-Free Savings Account (TFSA) annual contribution limits from $10,000 to $5,500 will also reduce future savings for millions of Canadians. Additionally, bracket creep will continue to punish all taxpayers in Manitoba, Prince Edward Island, and Nova Scotia, as well as high-income earners in Ontario and New Brunswick.
“While most provinces adjust their tax brackets for inflation, ensuring that salary increases that match inflation don’t push earners into a higher income tax bracket, provinces that don’t index punish workers and leave them worse off,” said Wudrick. “It’s shameful a province like Nova Scotia will squeeze an additional $20 from those who only make $30,000 a year with this hidden tax hike.”
CTF calculations for the tax changes that will be occurring on January 1st for 34 different income and family scenarios can be found
here.
Aaron Wudrick, CTF Federal Director
