Dana Flavelle Toronto Star, October 21, 2015
From tax cuts on middle incomes to an expanded Canada Pension Plan, the Liberals made a lot of promises during the federal election campaign that would affect Canadians’ finances.
Now that the Liberals have won a majority under leader Justin Trudeau, Canadians can expect to see major changes in federal fiscal policy.
That includes undoing some of the targeted goodies the Conservatives created — such as an expanded TFSA — in favour of making broader tax cuts and benefits.
How soon might Canadians see these changes?
In theory, “a government can introduce anything at any time when they’re in a majority,” said Brian Brophy, tax partner at Deloitte.
Plans to roll back TFSA contribution limits to $5,500 from $10,000 could be introduced as soon as Parliament resumes sitting, for example.
But, in practice, most major tax changes are announced in federal budgets, which are usually introduced in the late winter or early spring.
Some Liberal campaign promises, such as an expanded Canada Pension Plan, could take longer, as they require the support of seven out of 10 provinces representing two-thirds of the population.
The Liberals promised to meet with the provinces within the first 90 days to consult on the CPP. In the meantime, it’s unclear how that will affect the Ontario government’s plans to launch its own pension plan by January 2017.
How will the proposed tax changes affect families?
The impact of the Liberal’s proposed tax changes on individual families will depend on specific financial circumstances, said Caroline Battista, a senior tax analyst with H&R Block.
Even higher-income families will benefit from the tax cut on middle incomes, while some lower-income families could lose in the decision to end income splitting, she said.
She urges people to look beyond political rhetoric before assuming they don’t qualify for certain benefits.
“One of the things about our system is that it’s unique to the individual, based in their allowable deductions and qualifying tax credits,” she said.
What else have the Liberals said they’d do?
Here are some highlights:
Income taxes: The Liberals’ promised to cut the tax rate on middle incomes to 20.5 per cent from 22 per cent, reducing tax rates by as much as $670 a year on earnings between $44,700 and $89,401.
They would raise taxes on the wealthiest Canadians by introducing a new tax bracket of 33 per cent for earnings above $200,000 per year. Someone earning $220,000, for example, would pay an extra $800 a year.
Income splitting: They would scrap income splitting for families because they say it benefits only wealthy Canadians. The measure allowed couples to shift up to $50,000 in income from a high earner to their lower-earning spouse for a maximum tax savings of $2,000 a year.
Child care: They say they’d combine the Universal Child Care Benefit with child tax credits and other forms of social assistance, creating a monthly cheque for all families with household incomes below $150,000 and children under 18.
Work with provinces and territories to develop affordable child care plan within first 100 days in office.
Home ownership: The Liberals promised to expand the Home Buyers’ Plan to allow Canadians hit by sudden life changes — divorce, moves, job loss — to use RRSP funds to buy a house without a tax penalty. They also say they’d launch a review of home prices in hot markets such as Toronto and Vancouver, and remove the GST on new capital investments in affordable rental housing.
Retirement income: They say they would work with provinces and territories to enhance the CPP, return the eligibility age for Old Age Security to 65 and index it to inflation, and increase the Guaranteed Income Supplement for single low-income seniors by 10 per cent while maintaining income splitting for seniors.
Student finances: The Liberals promise to double the maximum Canada Student Grant for full-time, low-income students to $3,000 and increase the income threshold for eligibility, and cancel education and textbook tax credits and ensure no grad has to make loan repayments until they earn at least $25,000 per year. They’ve pledged $50 million for indigenous post-secondary students.
Employment insurance: They say they’d reduce EI wait times, increase eligibility and expand parental leave and compassionate care; invest $500 million more a year in skills training; and cut EI premiums to $1.65 per $100 earned.
Minimum wage: They voted in favour of an NDP motion in 2014 to raise the federal minimum wage, but have not made any promises to do so if elected.