Liberal plan to raise basic personal income tax deduction to cost $21B over 5 years: PBO - Action News
Home WebMail Thursday, November 14, 2024, 04:39 PM | Calgary | 6.6°C | Regions Advertise Login | Our platform is in maintenance mode. Some URLs may not be available. |
Politics

Liberal plan to raise basic personal income tax deduction to cost $21B over 5 years: PBO

Increasing the basic personal income tax deduction to fulfil a Liberalcampaign promise will cost the federal treasury more than $21 billion over the next five years, says a report by the Parliamentary Budget Officer.

PBO says tax changes will mean drop in federal revenue of $783M in 2019-20 and $6.8B by 2023-24

The Parliamentary Budget Officer has estimated that, once fully implemented, the increase in the basic personal deduction to $15,000 for those making under $147,000 a year will cost the federal government almost $6.8 billion a year in foregone revenue. (Shutterstock / Piotr Swat)

Increasing the basic personal income tax deduction to fulfil a Liberalcampaign promise will cost the federal governmentmore than $21 billion in foregone revenue over the next five years, says a report by the Parliamentary Budget Officer.

During the federal election, Prime Minister Justin Trudeau promised to increase the basic personal deduction to $15,000 from the current $12,298 through a means-tested roll-out meant to benefit people earning under $147,000.

Canadians only pay taxes on income greater than the basic personal amount.

The PBObased its cost calculations on the assumption that, under the government's plan, the basic personal amount would be increased each year from 2019-20to 2023-24, with an initial increase to $13,229 this year.

The Liberal government said the means-tested tax change would save the average family $585 a year once the change has been fully implemented.

The PBO estimate is close to that amount: $573 in savings for a two-parent family with children.

The benefit from the increase in the personal exemption drops as incomes rise; Canadians earning more than $210,371 will end up getting nothing.

The Parliamentary Budget Officer estimates that the change will cost the federal treasury $783 million this year, rising to $3.4billion in 2020-21, $4.5billion in 2021-22, $5.8billion in 2022-23 and $6.8billion by 2023-24.

The PBO numbers differ slightly from the Liberals' own costing of the change, which said the fully implemented change would cost $5.6 billion a year when fully implemented.

Source: Parliamentary Budget Officer
Individual's net income Reduction in an individual's annual taxes
$0 - $15,000 $1
$15,001 - $51,509 $211
$51,510 - $103,017 $337
$103,018 - $159,694 $347
$159,695 - $227,504 $257
$227,505 and above $11

The Liberals said this tax change would lift about 38,000 Canadians out of poverty.

Once the tax change is fully implemented, the basic personal income amount will be indexed to the Consumer Price Index in future years.

In December, the Liberals introduced a ways and means motion to amend the Income Tax Act .

Source: Parliamentary Budget Officer
Family type Reduction in family's annual taxes
Single person family $189
Couples with children $573
Couples without children $467
Single parent family $336

The NDP criticized the tax changeduring question period in the House of Commons Tuesday, saying the tax cut will help the wealthy more than lower-income Canadians.

"Liberals are taking from the poor and giving to the rich. They've got Robin Hood backwards," NDP MP Peter Julian said.

New Democrats said they want the Liberals to restrict any financial benefits from the tax changeto people earning $90,000 or less. The money goingto Canadians earning more than that amount, the party said, should be used to fund a national dental care program for people earning $90,000 or less.

Finance Minister Bill Morneau told the House Tuesday that the tax changewas designed to helpas many people as possible. He said the change will put more money into the pockets of 20 million Canadians and would be means-tested to ensure the rich don't benefit from it.

"It will help those people that are most in need of help," Morneau said.

The Conservatives also criticized the plan, saying the tax changes willadd to the deficit.

"Once again, Liberal promises will be more expensivethan advertised. Poor arithmetic will mean even bigger deficitsthan expected. The government must produce a plan to controlspending, and to contain and eliminate the growing deficit," said Pierre Poilievre, the Conservative finance critic.

Corrections

  • This story has been edited from a previous version that included a reference to costs to the "taxpayer." In fact, the increase in the basic personal exemption amount will mean most taxpayers will pay less tax; the PBO found the cost of the change to be $21 billion in foregone government revenue over the first five years.
    Jan 29, 2020 2:05 PM ET

Add some good to your morning and evening.

Your weekly guide to what you need to know about federal politics and the minority Liberal government. Get the latest news and sharp analysis delivered to your inbox every Sunday morning.

...

The next issue of Minority Report will soon be in your inbox.

Discover all CBC newsletters in theSubscription Centre.opens new window

This site is protected by reCAPTCHA and the Google Privacy Policy and Google Terms of Service apply.