Families with one high-income earner will see the most benefits from Harper’s changes to income taxes and family support payments.
Tax and benefit measures announced by Prime Minister Stephen Harper last month have been sharply criticized by opposition parties, but also by the conservative think tank, the Fraser Institute.
The tax shakeup announced by Prime Minister Stephen Harper last month will leave many Canadians in the cold. And while others will benefit, detailed calculations show the benefits may fall far short of expectations.
The changes in income tax and family supports are being trumpeted as a huge package of breaks for Canadians. At a cost of $26.7 billion between now and 2019, they will eat up the bulk of total budget surpluses forecast for Ottawa during that period.
Each taxpayer will be impacted differently by the complex interaction of new measures. But analysis shows the major benefactors will be households where one spouse earns a hefty income and the other earns a low income or no income.
For instance, a two-earner couple with young children where one spouse brings in $95,000 a year and the other earns $25,000 could see tax savings of nearly $3,000 in 2015 as a result of the new measures, according to Finance Department calculations.
Most of that windfall arises from the centrepiece of the Conservatives’ package, the so-called Family Tax Cut, a version of income-splitting for families with children. Single people, single-parent families or families with children who are no longer minors do not qualify for any kind of tax break under this measure.
In fact, only about 15 per cent of households will benefit from the $2 billion a year in foregone federal revenue devoted to income-splitting, with one-earner families at the top of the income scale coming out best. Two-earner families where spouses make similar incomes will see little or no benefit.
The average income of families that would receive any benefit from the Family Tax Cut exceeds $123,000, according to calculations done for the Caledon Institute of Social Policy.
Studies done in advance of Harper’s announcement had found that a family with one breadwinner in the highest income tax bracket could see the family’s federal tax bill reduced by $5,000 or more a year as a result of the Family Tax Cut. To eliminate such a huge windfall and keep the cost of the measure from skyrocketing, the government capped the possible tax savings from this policy at $2,000 per year per family.