The Trudeau government will be reducing government revenue by $3-6 billion in order to cut taxes by roughly $25 per month for working Canadians.
According to a motion tabled by Finance Minister Bill Morneau, Ottawa will increase the personal income tax exemption by $2,000, to $15,000.
The proposed amendment to the Income Tax Act would ensure that Canadians who make under $147,000 a year would pay no taxes on the first $15,000, with benefits being spread out over four years.
Interestingly, given the wording of the motion, a dual-income family earning nearly $300,000 would receive the full tax cut.
While some wealthy Canadians would receive the cut, nearly 1.1 million Canadians would pay no tax at all as a result of the increase.
Based on the government’s own estimates, implementing the cut will cost government revenues of $3 billion in the first year, rising to $6 by 2023.
While any tax cuts will be sure to be received well by Canada’s rather overtaxed population, especially when you look at the average tax rates across our southern neighbour, the timing of the cut may worry deficit hawks.
As of now, Canada is on track to hit a $27.4 billion dollar annual deficit, multiple times higher than what the Trudeau government promised, and on track to balance no sooner than two decades from now.
With 22 years needed to balance, according to the nation’s Finance Department, Canada could be in a problematic situation should a global recession occur.