Here are some highlights from the Ontario budget introduced by Finance Minister Charles Sousa:
Ontario proposes to change the way it taxes trusts, including estates, by paralleling the federal approach of applying the highest Personal Income Tax (PIT) rate to all trusts, with some exceptions, beginning in 2016.
The federal approach will limit tax planning opportunities and improve tax fairness and neutrality. As announced in the 2014 federal budget, all trusts, with certain exceptions, will pay the federal top marginal PIT rate of 29% on all of their taxable income.
Graduated federal rates will continue to apply for the first 36 months of eligible estates (Graduated Rate Estates, or GREs) and to trusts created as a consequence of the death of an individual that have beneficiaries eligible for the federal Disability Tax Credit (Qualified Disability Trusts, or QDTs).
The Ontario government proposes that graduated Ontario rates and the Ontario surtax would continue to apply to GREs and QDTs taxable in Ontario. All other trusts (top-rate trusts) taxable in Ontario would pay the province’s top marginal PIT rate of 20.53% on all of their taxable income.
The Ontario tax credit rate for charitable donations over $200 would be raised to 17.41% for top-rate trusts. This higher rate is consistent with the maximum benefit of the credit for individuals who pay the Ontario surtax.
The government will introduce legislative amendments to implement these measures that, if passed, would take effect for taxation years ending after December 31, 2015.
- Ontario’s deficit will be reduced from $10.9 billion to $8.5 billion in 2015-16, falling to $4.8 billion in 2016-17 and return to balance by 2017-18.
- The $131.9-billion budget includes $120.5 billion in program spending plus $11.4 billion in interest on the province’s debt, which is projected to hit $298.9 billion next year.
- $11.9 billion in 2015-16 for infrastructure projects such as highway improvements in northern Ontario and rapid transit — part of a $130-billion, 10-year plan announced in last year’s budget.
- An additional $200 million for a 10-year jobs fund announced last year, with a total of $2.7 billion for the program that provides corporate grants in return for jobs.
- Insurance companies will be required to give drivers a discount for using winter tires on their vehicles. However, the standard duration of medical and rehabilitation benefits will be reduced from 10 years to five years for all claimants except children.
- $9 billion expected to be raised from the sale of 60% of Hydro One, the giant electricity transmission utility, $4 billion of which will be devoted to public transit.
- $100 million a year will be raised with a new tax on all beer sold in Ontario as part of modernization plan that will allow some grocery stores to sell six-packs of beer.
- $50.8 billion for health care, the single largest government expenditure, which is projected to grow an average of 1.9% a year over three years.
- $25.2 billion for education, which will grow by 2% a year, while funding for post-secondary education and training will hold steady at $7.8 billion.
- All other areas will face average decreases of 5.5% a year until the deficit is eliminated, but they represent only 16% of government’s total program spending.