A tax cut for all Canadians
(fifth in a five-part series)

Ottawa - Monday, June 23, 2003 - by: Walter Robinson, Federal Director, Canadian Taxpayers Federation


In February 2000, the Canadian Taxpayer Federation three-year campaign to end bracket creep — the non-indexation of tax brackets — was completed with the restoration of full-indexation announced in the federal budget. It meant, and still does, that Canadians saved some $20.7 billion on their federal income taxes that they otherwise would have paid between 2000 and 2004.



low &

This campaign represented the ideal combination of good fiscal policy and great social policy. Ending bracket creep benefited all Canadian taxpayers but there was no doubt it was particularly help for lower and middle-income earners as well as those on fixed incomes.




The next bracket creep-like opportunity is now upon us: it’s time to dramatically raise both the basic personal exemption — (presently at $7,756) and spousal exemption (presently at $6,586) to $15,000 by 2008.




Why $15,000 you may ask? Simply stated, $15,000 is roughly the average amount earned (before taxes) by a minimum wage employee. Why do we tax these people who are just entering the workforce, considered working poor, or students just looking to earn a few extra bucks to make ends meet? The importance of this question becomes self-evident when one considers that we recycle a good deal of the taxes paid by minimum wage workers back to them in the form of GST credits and other tax benefit schemes. It truly is a make work project for tax collectors in Ottawa.




Here’s a novel idea. Why not simply raise the basic personal exemption and leave more — if not all — of this money on their paycheques in the first place so low-wage earners can have the dignity of better providing for their families on a daily, weekly and monthly basis?




Indeed, this issue was raised in the Canadian Taxpayer Federation 2003 pre-budget submission before the House of Commons Finance Committee during its pre-budget hearings last November.



97% earn
< $100,000

Over 83% of Canadian tax filers (all 22 million of us) make $50,000 or less. And a 97% of Canadians make less than $100,000. It bears repeating that raising the basic personal exemption is a tax cut for all Canadians.




Canadian Taxpayer Federation calculations peg the maximum cost of raising the basic personal exemption to $8,000 at $602 million and if the spousal exemption (currently at $6,586) is also hiked to $8,000, the total impact would equate to $1.3 billion. A move to hike the basic personal exemption to $10,000 would cost $5.5 billion and combined with an equivalent increase in the spousal exemption would result in a $7.2 billion impact — removing almost 588,000 Canadians from the tax rolls.



no taxes

Getting to the target basic personal exemption amount of $15,000 would represent a $17.8 billion maximum impact on the public treasury or a $22 billion hit (read: tax cut) if the spousal exemption is increased to $15,000 over the same period as well. This would permanently remove over 2.1 million Canadians from the tax rolls.



over taxing

Spread over five years, it would be relatively easy to allocate $4.4 billion annually to bump the basic personal exemption to $15,000. And Ottawa has the capacity to do this as John Manley’s last budget predicted $70 billion in over-taxation surpluses through to 2007.




From a fiscal perspective this is wholly affordable. From a social justice perspective, providing tax relief for all Canadians but most specifically lower-income Canadians is very compelling.


The Bush tax cut proposals from January 2003 ensure that an American family of four earning $40,000 or less will pay no federal income tax. Today, a similar Canadian family starts to pay taxes at $27,000. Raising our basic personal and spousal exemption is really not a question of choice, it’s an absolute necessity. It should be Paul Martin’s first budget priority in 2004. After all, it is a tax cut for all Canadians.

Walter Robinson
Federal Director



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