Christopher Liew is a CFP®, CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.
If there’s one thing voters across the political spectrum can agree on, it’s wanting lower taxes and better value for the money the government collects.
That said, each party differs when it comes to their ideas of what constitutes a fair tax system and how taxes should be utilized.
Below, I’ll briefly outline each party’s approach to taxation and their proposed tax cuts and offer my realistic opinion on how these changes could actually affect taxpayers.
Canada’s current tax system
Canada has a progressive income tax system, meaning that the more an individual earns, the higher percentage of tax they’ll pay. Income tax brackets are typically adjusted on an annual basis to account for inflation, and you can view the most up-to-date tax brackets on the CRA’s website.
When politicians discuss lowering taxes, though, they aren’t always talking about lowering federal income taxes. Some of the other taxes that could cause voters to save (or pay more) include:
● Carbon taxes and/or green energy tax cuts
● GST/HST sales taxes
● Capital gains taxes on investments
● Tax credits, refunds, and rebates for various individual and business categories
Combined, even small changes to these various taxes can trickle down and affect taxpayers’ wallets, saving them or costing them hundreds or thousands of extra dollars each year.
Proposed cuts to income taxes
Mark Carney has proposed a middle-class tax cut reducing the lowest federal income tax bracket from 15 per cent to 14 per cent. While this may not sound like a lot, the Liberals estimate this would benefit over 22 million Canadians, saving a typical two-income family up to $825 a year. The focus is clearly on middle-class earners, with the goal of easing the strain of everyday expenses like groceries, housing, and transportation.
Similarly, Pierre Poilievre is also offering a cut, and plans to reduce the lowest bracket to 12.75 per cent over a two-year period. His party claims this would save an average income earner around $900 annually, with dual-income households seeing up to $1,800 in savings.
In addition to this, Poilievre has also promised an extra tax break for retirees, allowing seniors to earn up to $34,000 tax-free, which is $10,000 more than today’s threshold.
How this could affect taxpayers’ bottom line
Poilievre’s more significant income tax cuts will be marginally more noticeable for most individuals and families. However, they also come with a heavier price tag for the government, compared to the smaller tax cut proposed by Carney.
Without offsetting government spending, both plans could increase the federal deficit and lead to long-term sustainability issues.
Proposed changes to consumption taxes
Poilievre and Carney’s opinions clash more when it comes to consumption taxes such as the carbon tax, green tax rebates, and certain GST/HST tax categories.
While the Liberals plan to maintain the industrial carbon pricing system for large polluters, Carney just moved to completely remove the federal consumer carbon tax beginning this month. This will save taxpayers money at the pump and could reduce the cost of heating their homes.
Instead of penalizing consumers for their usage, Carney plans to double-down on green rebates and incentives such as grants for home insulation, energy-efficient appliances, and purchasing electric vehicles.
He’s also offering targeted help for first-time buyers, pledging to remove GST on new homes priced under $1 million, with the goal of making homeownership slightly more affordable for young families.
Poilievre and the Conservatives have taken a far more sweeping approach, vowing to eliminate the entire federal carbon tax system for both consumers and industrial players.
He also plans to remove the GST on new homes up to $1.3 million and extend the tax break to all buyers (not just first-time homeowners). Furthermore, Poilievre has pledged to eliminate the GST on new Canadian-made vehicles, which could bolster the manufacturing economy.
How realistic are these promises?
On paper, both plans stand to positively affect taxpayers’ finances.
Poilievre’s approach seems to be slightly broader, with deeper income tax cuts, the total elimination of the carbon tax, and more significant GST breaks on new homes and cars.
By contrast, Carney’s plan is more targeted and aims to provide a moderate income tax cut for the middle class, GST relief for first-time homebuyers, and the removal of the consumer carbon tax (while keeping climate incentives in place).
At the end of the day, taxes could very well go down for Canadians after the coming election. However, the exact scale, timing, and sustainability of those cuts will depend on what happens after the campaign ends, when the words stop and the action begins.
