Economics 12 Blogs

Chapter 4

Chapter 4 Article
Title: New year tax reductions won’t make anyone rich
Source: Eric Beauchesne, CanWest News Service

Starting next year, all Canadians will have less tax taken off their paycheques, some more than others. This tax relief more than offsets the current increases in payroll taxes. The Canadian Taxpayers Federation says that the new employment tax credit will increase to $1,000 for the 2007 tax year, up from $250 in 2006. They further add that low-income individuals, earning less than $25,000 annually, will benefit the most from the jump in that credit. Next year, Canadians will pay more payroll taxes and the lowest personal income tax rate will rise to 15.5 per cent, from 15.25 per cent. However, it’s less than Finance Minister Jim Flaherty has been claiming. While employee EI premium rates will drop by seven cents to $1.80 per $100 of insurable earnings, the maximum insurable earnings will rise to $40,000 from $39,000, this will result in a mere 1.3-per-cent reduction in premiums from 2006 levels. Also, as the employee premium rate remains at 4.95 per cent of insurable earnings, the ceiling on those earnings will rise to $43,700 from $42,100. As a result, the net payroll tax bill will increase by $70 per worker because the EI tax reductions will be consumed by a higher EI threshold and rising CPP payments, and this will reduce the overall income and payroll tax savings. Those savings will amount to $126 for someone earning $15,000, $82 at an income of $35,000, $106 at $45,000, $106 at $60,000, and $126 at $100,000. For a two-earner family of four with an income of $80,000, the reduction in both federal and provincial income taxes will range from $940 in Alberta to $861 in Saskatchewan. For a one-earner family of four with an income of $80,000, the savings will range from $1,545 in Alberta to $964 in Quebec. Without doubt, families with young children will benefit the most because they will be given $100 each month for each child they have under the age of six.


In a way, I think this is our government’s way of distributing wealth and financial equality. Although this is a compensation for many of the cutbacks that we’ve been having these past years, I think this Canadians will be better off this way because they will benefit directly. Taxes are lowered, and in addition, money will be given out to Canadians to support their families. On the other hand, with all these benefits that we will receive, it will take us longer to pay off our national debt. Therefore, we may be the generation that will have to pay off the debt with our payroll taxes, instead of our parents, unfortunately.

posted by 12yangee @ 12:03 AM