NCPA - National Center for Policy Analysis


August 21, 2006

Ottawa's multi-year and multi-billion dollar surpluses, along with continual increases in government program 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


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