While reflecting on his tenure, Prime Minister Trudeau said he was proud that his government reduced taxes for middle-class Canadians. In reality, taxes for middle-class families have increased since he took office. That’s a major part of his legacy as prime minister.
January 10, 2025, By: Jake Fuss and Grady Munro Fraser Institute
On Monday, January 6, 2025, outside Rideau Cottage in Ottawa,
after Prime Minister Justin Trudeau told Canadians he plans to resign, a
reporter asked Trudeau to name his greatest accomplishments. In response, among other things, Trudeau said
his government “reduced” taxes for the “middle class.” But this claim doesn’t withstand scrutiny.
After taking office in 2015, the Trudeau government reduced
the second-lowest personal income tax rate from 22.0 per cent to 20.5 per
cent—a change that was explicitly sold by Trudeau as a tax cut for the middle
class. However, this change ultimately
didn’t lower the amount of taxes paid by middle-class Canadians. Why?
Because the government simultaneously eliminated several tax
credits—which are intended to reduce the amount of income taxes owed—including
income splitting, the children’s fitness credit, children’s arts tax credit,
and public transit tax credits. By
eliminating these tax credits, the government helped simplify the tax system,
which is a good thing, but it also raised the amount families pay in income
taxes.
Consequently, most middle-income families now pay higher
taxes. Specifically, a 2022 study
published by the Fraser Institute found that nearly nine in 10 (86 percent)
middle-income families (earning household incomes between $84,625 and $118,007)
experienced an increase in their federal personal income taxes as a result of
the Trudeau government’s tax changes.
The study also found that other income groups experienced
tax increases. Nearly three-quarters (73
percent) of families with a household income between $54,495 and $84,624 paid
higher taxes as a result of the tax changes. Across all income groups, 61 percent of
Canadian families faced higher personal income taxes than they did in 2015.
The Trudeau government also introduced a new top tax bracket
on income over $200,000—which raised the top federal personal income tax rate
from 29 per cent to 33 per cent—and other tax changes that increased the tax
burden on Canadians including the recent capital gains tax hike. Prior to this hike, investors who sold capital
assets (stocks, second homes, cottages, etc.) paid taxes on 50 percent of the
gain. Last year, the Trudeau government
increased that share to 66.7 percent for individual capital gains above
$250,000 and all capital gains for corporations and trusts.
According to the Trudeau government, this change will only
impact the “wealthiest” Canadians, but in fact it will impact many middle-class
Canadians. For example, in 2018, half of all taxpayers who claimed more than
$250,000 of capital gains in a year earned less than $117,592 in normal income.
These include Canadians with modest
annual incomes who own businesses, second homes or stocks, and who may choose
to sell those assets once or infrequently in their lifetimes (when they retire,
for example). These Canadians will feel the real-world effects of Trudeau’s
capital gains tax hike.
While reflecting on his tenure, Prime Minister Trudeau said
he was proud that his government reduced taxes for middle-class Canadians. In
reality, taxes for middle-class families have increased since he took office.
That’s a major part of his legacy as prime minister.
1 comment:
Fact-checkers eventually exposed the poser liar. Reality finally caught up to the big fake.
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