Tax relief for all Canadians

September 6, 2006

Free Market Foundation

Ottawa’s multi-year and multi-billion dollar surpluses, along with continual increases in government programme expenditures, are proof that Canadians are over-taxed, says John Williamson, federal director of the Canadian Taxpayers Federation.

Canada’s basic personal exemption (BPE) the amount an individual earns before paying federal income taxes is one of the lowest in the industrial world at $8,839 (US $7,900). As a result, even those in the bottom income bracket are subject to high tax rates.

To help alleviate the problem, says Williamson, the BPE, along with the spousal exemption, currently set at $7,505 (US $6,710), should be raised to $15,000 (US $13,410) each. Such broad based tax relief would help taxpayers that need it most:

Individuals earning $15,000 or less and families with incomes below $30,000 (US $26,815) would no longer pay any federal income tax.

All other taxpayers would save $950 (US $850) a year.

The tax bill of a dual-income family would fall by $1,900 (US $1,700).

And the amount paid by single-income families would drop by $2,100 ($1,878).

In addition, if implemented over 4 years, the government could avoid a revenue shock, and still help taxpayers reduce their tax burden, says Williamson:

Raising the BPE to $10,000 (US $8,940) next year would remove 525,000 Canadians from the tax rolls and cut income taxes by $3.8 billion (US $3.4 billion).

Setting the exemptions at $11,500 (US $10,280) in 2008 would save workers nearly $8 billion (US $7.1 billion).

A jump to $13,000 (US $11,600) would leave another $10 billion (US $8.9 billion) in the pockets of taxpayers in 2009.

Reaching the $15,000 BPE and spousal exemption target in 2010 represents an additional $15 billion (US $13.5 billion) tax reduction.

Overall, 1.7 million of Canada’s lowest income workers would be removed from the tax rolls, and the remaining 14.1 million taxpayers would benefit by nearly $40 billion (US $35.8 billion) in retained earnings, says Williamson.

Source: John Williamson, Tax Relief for all Canadians, Fraser Institute, July/August 2006

For text: http://www.fraserinstitute.ca/admin/books/chapterfiles/JulAug06ffWilliamson.pdf#

For more on Taxes: http://www.ncpa.org/sub/dpd/index.php?Article_Category=20

FMF Policy Bulletin/ 29 August 2006