Liberal income tax cut could benefit top earners: PBO

By Jordan Press, The Canadian Press | January 28, 2020 | Last updated on September 15, 2023
2 min read

Some of the country’s highest earners could end up benefiting from the Liberals’ newly enacted income tax cut more than those at the lower end of the income scale, the parliamentary spending watchdog says.

A report Tuesday from the parliamentary budget office says Canadians earning between about $160,000 and $227,500 will, on average, save about $257 a year in taxes once the tax cut is fully implemented in 2023.

While that’s not the biggest amount of savings to Canadians, it is just above the $211 to be saved by those earning around $51,000.

The Liberals sold the measure during the election and in the first weeks of their new mandate as helping low- and middle-income earners, while ensuring those at the high end of the income scale didn’t get to pocket any savings.

But the budget office says that isn’t likely to happen based on how the Liberals set up the income-tested tax break.

As it stands, a high-income earner could claim a tax credit for a spouse or child who earns little or nothing and benefit from the income tax change, even if they technically earn too much to qualify.

“You’d think that those above the income cutoff threshold for the basic personal amount would not benefit in any sense, but they do,” budget officer Yves Giroux said in an interview.

The change will mean that 900,000 people won’t have to pay any income tax — usually those at the very lowest end of the income spectrum, the PBO said. Overall, the budget office estimated that 21 million taxpayers will see some savings as a result of the change.

The tax break, which took effect Jan. 1 and will be phased in over four years, increases the amount someone can earn before they are taxed on it, lifting the amount ultimately to $15,000 from $12,300.

The report says Canadian individuals will have $218 in average annual tax savings when the cut is fully implemented in 2023. The average annual savings for families by that time would be $364.

Casting ahead to 2023, the PBO also projected what federal income tax brackets will look like to determine the tax-effect spinoff.

The budget office expects that those earning between $103,018 and $159,000 will see the biggest savings at $347, followed not too far by the $337 in yearly savings to those with net incomes between $51,510 and $103,017.

Giroux said how higher-earning families do their taxes to benefit from the changes will likely be an ongoing feature of the new regime, unlike the tax change the Liberals brought in after their 2015 election victory.

That change increased rates on the country’s top earners. Many shielded themselves from the new rules, but only for the first year they were in place.

Giroux’s report said there will be just under $21.5 billion in lost tax revenues through to March 2024. In December, the Finance Department reported the cost at $18.9 billion over the same period, a difference of about $2.5 billion over that time.

The Canadian Press logo

Jordan Press, The Canadian Press

Jordan Press is a reporter with The Canadian Press, a national news agency headquartered in Toronto and founded in 1917.