Middle-class tax cut?

Early in their second month in office, the newly elected liberal party of Canada implemented their campaign promise marketed as “the middle-class tax cut”.

The so called middle-class tax cut is a $670 tax savings to anyone making more than 90k and up to 200k. These kind of salaries are over and beyond the salaries earned by the bottom 80% of Canadian.

As it happens, the new MP salaries falls within this range ($170,400; The MPs also awarded themselves a salary increase on March 2016).

Here are the fine details: Starting in the 2016 tax year, the federal tax rate on income between $44,700 and $89,401 will fall from 22% to 20.5%. At the same time, the rate on income $200,000 and over will rise from 29% to 33%.

Any tax savings from a tax cut to any specific income tax bracket trickles up to the higher income tax brackets. To see why, look at Canada Revenue Agency Individual tax rates page.

So this tax cut will save you $670 if you’re making between $89,400 and $200,000. Tax savings will still benefit those with incomes of up to about $217,000. At this point the tax cut of the middle tax bracket will balance the tax rise of the high tax bracket. But if you make $51,366 a year, it will save you merely $100. And if you make $44,700 or less, it won’t save you a penny.

Further reading:

The truth about Trudeau’s tax cuts: How Trudeau’s plan takes from the rich and gives to the almost-as-rich
John Geddes, Maclean’s magazine

How most Canadians will be left out in the cold by Trudeau’s proposed tax cut Jamie Golombek, National Post

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