With the recent provincial budget and election of a new federal government it would be a good idea to review actual and proposed financial changes that will affect Canadians. Keep in mind this is a list of the highlights, it is not comprehensive.
The most notable tax changes will be the proposed tax cut for middle income earners, so if your income falls between $44,701 and 89,401, you will pay 20.5% tax instead of 22%. For people who earn more than $200,000 their tax rate will increase from 29% to 33%.
The new government has promised to decrease the current TFSA limit from $10,000 to $5,500. The lower amount will likely be indexed to inflation.
The Family Tax Cut that benefited high income earners who had children under 18 and a stay at home spouse or spouse with minimal earnings will be abolished. The Child Tax Benefit and the National Child Benefit Supplement will also be eliminated. The Universal Child Credit Benefit will be replaced with an income tested Canada Child Benefit. This credit will not be dependent on the child’s age as was the UCCB.
The revamping of these various tax regimes will help the new government pay for some of its promises. The cancelling of the FTC alone will save the government 2 billion dollars.
There are also changes to OAS and GIS which will be positive for low income seniors. The tax credits for students also get revised, and low income students should benefit from the proposed legislation. The premiums for EI will be decreased, but there is discussion about increasing CPP contributions.
When will these changes take effect? Most likely when there is a new budget, which traditionally is early in the new year. It is possible that the changes might be made retroactive to the beginning of 2016 but that remains to be seen.
I was also asked if it is wise idea to run a deficit at the federal level. The new government has taken a different tactic than Europe where countries have applied austerity measures in order to get their economies back on track. The idea behind selective borrowing is to stimulate the economy so that people can be employed and earn a living. The amount of the proposed deficit seems like a large number but in percentage terms is a small amount. And the deficit is supposed to be temporary. Also the cost to borrow is at an all time low.
Here in Alberta the new provincial government has presided over falling oil prices. Previous governments had used royalty revenues for program spending. This dependence on oil revenues will now mean that the flat income tax that Albertans enjoyed will become a thing of the past. In line with the other provinces we will now be part of a graduated tax regime. The new tax rates are as follows
$125,001 12 %
$150,001 13%
$200,001 14%
$300,001 15%.
These rates will be fully effective in 2016. For 2015 they became effective October 1st. As a result, for the 2015 tax return these new rates will be prorated. If you want to know the exact percentages contact me.
Still for those taxpayers earning between $50 and 180,000 they are still better off under the new government because of the removal of the health care levy which the outgoing government had promised to implement.
If you want the sources for this information please contact me.
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