92% of families face tax hike of over $2,200, starts 2019

[Gone_Fishin]

92% of families face tax hike of over $2,200 beginning in 2019: Fraser Institute


A new Fraser Institute report — The Effect of Canadian Families of Changes to Federal Income Tax and CPP Payroll Tax — says more than 90% of Canadian families will pay higher taxes once the Canada Pension Plan tax increases are fully implemented by 2025. The first of seven increases to CPP tax — which all workers much pay — begins January 2019. The study’s co-author, Charles Lammam, talks about the impact on middle-class families.

What was the most surprising thing you found in the report?

“Canadian families will endure a significant tax increase and that tax bill will increase over time. The Trudeau government has talked a lot about cutting taxes for families. Based on the personal income tax changes they’ve already put in the case, we’ve found that’s not true for the vast majority of middle class families. But then there are major tax changes set to come into effect, starting next year, particularly the payroll tax hike to fund the Canada Pension Plan expansion. We found that plus what has already been implemented will result in over 92% of all families with children in Canada paying higher taxes and they’ll be paying on average $2,200 more per year.”


Why is this significant?

“The Trudeau government has repeatedly claimed to cut taxes on the vast majority of families and our findings show that’s not the case…The reason why the Trudeau government is claiming they cut taxes because they’re focusing on just one of the many changes that they’ve either enacted themselves or spearheaded as a government. The focus has been on the federal rate cut from 22% to 20.5% — however, the reality is they’ve introduced several other tax changes both to the personal income tax system and they’ve spearheaded with the provinces, CPP, which will result in higher payroll taxes.”


What does a $2,200 tax hike mean in context for 92% of families in Canada?

snip

It is a significant increase in the tax bill, no doubt. When we look at the middle class, they’re actually more hard-hit than the overall average. Which is ironic because that is the group of families that Trudeau government has said they want to help. In fact, what will happen in practice, there will be basically no tax decrease for anybody once the CPP tax changes are in full effect.”


What happens to the remaining 8% of families?

“Either their tax bill stays the same or slightly decrease. We don’t do the analysis – who the incomes are of the 8%. It’s not something our analysis includes. What I can say is when you look at that middle group of families – these are families with income of $78,000 and $110,000. About 99% in this income range will be paying higher taxes.”

Your report explains that Canadian families could be paying even more. Can you explain?

“In our report, we’ve only calculated two of the major tax changes that have been announced so far. But then there’s others that we do not account for in these numbers. So, for example, you raise the carbon tax. This is a federally mandated tax that will be increasing over the course of the coming years. The potential for an even higher tax bill for families is greater than what we’ve outlined here. There’s also the scaling back of the contribution room of the Tax Free Savings Account, there are also new taxes they’re implementing on small businesses.”

How can Canadian families prepare for this up-shift in taxes beginning Jan. 2019?

“I don’t know if they can. A tax is a forced contribution to the government. I think the takeaway is we have a government that is repeating a claim to Canadians and I think it’s important for Canadians to be aware of what the claim is. And the reality is contrary to what the government is saying.”

BY THE NUMBERS

92.2% – The percentage of Canadian families with kids that will pay higher taxes as a result of federal income tax changes and the Canada Pension Plan payroll tax hike

$2,218 – What Canadian families with kids—regardless of income—will pay, on average, in higher taxes

$1,624 – What the CPP tax increase alone will cost

2025 – The year the CPP payroll tax hike will be fully implemented

http://torontosun.com/news/national/92- ... -institute

[Snman]

Hey justincase, can you paint this all shiny for us please? I know there simply MUST be some explanation that will indicate the opposite of this report.

[Poindexter]

Did they calculate what the average tax increase would be exclusively for the income bracket in question?

What I can say is when you look at that middle group of families – these are families with income of $78,000 and $110,000

To group them with 92 % of the population could be done intentionally to skew the finding. I don't know if thats the case but if those over $250,000 are receiving a large tax increase and they are being grouped in the 92% along with the medium income, the results would make medium income's increase in yearly taxes seem higher than they factually are. Likewise, if the 8% that aren't included in the study are the lower income people, their decrease in taxes would be removed from the calculation, also driving the average higher. Not saying that the report isn't accurate, just that it could be misleading and would like to know a little more about who's included and excluded from the 92%, and why.

[rustled]

The full report:
https://www.fraserinstitute.org/sites/d ... ll-tax.pdf

ETA: I think what you're looking for is illustrated in the table on page 5. The text doesn't paste well. Maybe someone could grab a screen shot and paste it as an image.

[Gone_Fishin]

The table shows almost ALL families irrespective of income getting hammered by Trudeau, even 3/4s of poor people.

Table 2: Number and Percentage of Canadian Families with Children Paying Higher
Taxes after Accounting for Federal Income Tax and CPP Payroll Tax Changes

Family income range ($) Number of families paying higher taxes (‘000s) All families (‘000s) Percent of total paying higher taxes

Quintile 1: 1 - 50,541............. 450 .........................................................596............................... 75.6%
Quintile 2: 50,542 - 77,838...... 583 ....................................................598............................... 97.5%
Quintile 3: 77,839 - 110,201..... 590 ....................................................597............................... 98.8%
Quintile 4: 110,202 - 153,400... 579 ....................................................599............................... 96.6%
Quintile 5: 153,401+ ............. 554 ....................................................598............................... 92.6%
All Incomes......................... 2,756................................................. 2,988............................... 92.2%

Source: Calculations by authors based on Statistics Canada’s SPSD/M (version 22.3).

[Poindexter]

The full report:
https://www.fraserinstitute.org/sites/d ... ll-tax.pdf

ETA: I think what you're looking for is illustrated in the table on page 5. The text doesn't paste well. Maybe someone could grab a screen shot and paste it as an image.

Appreciate the link. Appears I was right, the 92% excludes the bottom tax bracket and includes every other tax bracket up to and including the new 33% brackets for those over $203,000. Can't say they were intentionally trying to mislead about what the averge tax increase for middle income will be, but the exclusion of bottom tax bracket with the inclusion of the top tax bracket would indicate that to be the case. Perhaps they were more preoccupied with providing a salacious title to their study, than showing what the actual tax increase for middle income will be in 2019.

[Poindexter]

The table shows almost ALL families irrespective of income getting hammered by Trudeau, even 3/4s of poor people.

Table 2: Number and Percentage of Canadian Families with Children Paying Higher
Taxes after Accounting for Federal Income Tax and CPP Payroll Tax Changes

Family income range ($) Number of families paying higher taxes (‘000s) All families (‘000s) Percent of total paying higher taxes

Quintile 1: 1 - 50,541............. 450 .........................................................596............................... 75.6%
Quintile 2: 50,542 - 77,838...... 583 ....................................................598............................... 97.5%
Quintile 3: 77,839 - 110,201..... 590 ....................................................597............................... 98.8%
Quintile 4: 110,202 - 153,400... 579 ....................................................599............................... 96.6%
Quintile 5: 153,401+ ............. 554 ....................................................598............................... 92.6%
All Incomes......................... 2,756................................................. 2,988............................... 92.2%

Source: Calculations by authors based on Statistics Canada’s SPSD/M (version 22.3).

I'm not a fan of higher taxes but I'm even less a fan of misleading people who eventually have an impact on policy. In my opinion it's intentionally misleading to have a title to a study that says 92% of families will pay $2200 more in taxes, and then ask the person reading it to look at the fine print to see that the average middle income families will actually be seeing an increase between $450 and $600. Still not good to have a tax increase but making if seem like more than it is doesn't help anyone.

[GordonH]

There are 2 guarantees in life:
you will die one day
you will pay taxes

[hobbyguy]

And the point is?

Anti-tax ideologues are off the mark AGAIN.

CPP is NOT a tax for the average person. You get it back, and if you are lucky, and then some - plus if you kick the bucket, your spouse collects more. CPP is PENSION plan, it is NOT a tax. CPP forms a valuable part of retirement savings for 90+% of Canadians.

I know, anti-tax ideologues will whine an snivel about CPP, but for the vast majority of Canadians it is a good deal, and it isn't a tax at all. It is just a pension plan that they contribute to and get matching funds from employers - just like most plans - with one big difference, and that is that dirty dog hedge funds jerks can't strip company assets and steal it.

Yes, there will be a little more income tax for folks to pay. Funny how the anti-tax ideologues refuse to see Harper's "tax cuts" for what they are - tax expenditures, and foolish ones. The same anti-tax ideologues will whine and snivel about deficits, but when it comes time to py their share - boo hoo hooo! the crocodile tears start.

Guess what? Canadian taxes are too low because Harper was an anti-tax ideologue. $30 billion in tax expenditures by Harper that only benefited the wealthy. Without that reckless tax expenditure, which dumped the country into deficit, there would not be a deficit.

So dear anti-tax ideologues:

Don't wanna pay your fair share to live the great country of Canada? Somalia beckons - low taxes there, just your kind of place!

[rustled]

The table shows almost ALL families irrespective of income getting hammered by Trudeau, even 3/4s of poor people.

Table 2: Number and Percentage of Canadian Families with Children Paying Higher
Taxes after Accounting for Federal Income Tax and CPP Payroll Tax Changes

Family income range ($) Number of families paying higher taxes (‘000s) All families (‘000s) Percent of total paying higher taxes

Quintile 1: 1 - 50,541............. 450 .........................................................596............................... 75.6%
Quintile 2: 50,542 - 77,838...... 583 ....................................................598............................... 97.5%
Quintile 3: 77,839 - 110,201..... 590 ....................................................597............................... 98.8%
Quintile 4: 110,202 - 153,400... 579 ....................................................599............................... 96.6%
Quintile 5: 153,401+ ............. 554 ....................................................598............................... 92.6%
All Incomes......................... 2,756................................................. 2,988............................... 92.2%

Source: Calculations by authors based on Statistics Canada’s SPSD/M (version 22.3).

I'm not a fan of higher taxes but I'm even less a fan of misleading people who eventually have an impact on policy. In my opinion it's intentionally misleading to have a title to a study that says 92% of families will pay $2200 more in taxes, and then ask the person reading it to look at the fine print to see that the average middle income families will actually be seeing an increase between $450 and $600. Still not good to have a tax increase but making if seem like more than it is doesn't help anyone.

I'm not sure what you're looking at for the $450 to $600. The chart above has "number of families affected (in thousands), not the amount of increase. That's on the next page:

Table 3: Breakdown of the Overall Average Change for Families with Children Paying Higher Taxes after Accounting for Federal Income Tax and CPP Payroll Tax Changes
Fam.inc.range ($)... Fed.inc.tax rt.chg... Elim.inc.split,TCs & ind.effects....CPP payroll tx inc... Overall ave. chg
Quintile 1: 1 - 50,541 .......................-31 ...................81 ...................................388 .................... 438
Quintile 2: 50,542 - 77,838............ -135 .................336 ..................................952 .................. 1,153
Quintile 3: 77,839 - 110,201........... -421 ...............1,001 .............................. 1,680 .................. 2,260
Quintile 4: 110,202 -153,400 .......... -739 ...............1,094 ..............................2,224 ...................2,579
Quintile 5: 153,401+ ........................603 ...............1,116 ..............................2,654 ....................4,373
All Incomes.................................... -158................ 752 ...............................1,624 .....................2,218

I've bolded the three pertinent figures. Looks to me like the headline's reasonably accurate?
ETA: the note re: the CPP tax is also pertinent:

It is likely that the employer portion of the CPP payroll tax increase will fall on employers in the first few years of the transition. After a few years, the increased employer portion of payroll taxes will likely be paid for by reductions in other compensation.

[rustled]

And the point is?

Anti-tax ideologues are off the mark AGAIN.

CPP is NOT a tax for the average person. You get it back, and if you are lucky, and then some - plus if you kick the bucket, your spouse collects more. CPP is PENSION plan, it is NOT a tax. CPP forms a valuable part of retirement savings for 90+% of Canadians.

I know, anti-tax ideologues will whine an snivel about CPP, but for the vast majority of Canadians it is a good deal, and it isn't a tax at all. It is just a pension plan that they contribute to and get matching funds from employers - just like most plans - with one big difference, and that is that dirty dog hedge funds jerks can't strip company assets and steal it.

Yes, there will be a little more income tax for folks to pay. Funny how the anti-tax ideologues refuse to see Harper's "tax cuts" for what they are - tax expenditures, and foolish ones. The same anti-tax ideologues will whine and snivel about deficits, but when it comes time to py their share - boo hoo hooo! the crocodile tears start.

Guess what? Canadian taxes are too low because Harper was an anti-tax ideologue. $30 billion in tax expenditures by Harper that only benefited the wealthy. Without that reckless tax expenditure, which dumped the country into deficit, there would not be a deficit.

So dear anti-tax ideologues:

Don't wanna pay your fair share to live the great country of Canada? Somalia beckons - low taxes there, just your kind of place!

It's reasonable for people to want to pay less.

It's also reasonable for people to want transparency, from the FI and from the federal government.

As someone who pays both portions of the CPP, I'm well aware of what a good deal it is. Take that out of the equation, and look at the rest of it.

It would appear to me that quintile 3 is taking a bigger hit than quintile 4. Expressed as percentage of income, that's an even bigger hit still. IMO, questioning the fairness of this does not make one an "anti-tax idealogue" crying "crocodile tears", but whatevs.

The federal government cannot crow about reducing the tax burden for the average family with children when they're actually reducing it on the one hand, and increasing it on the other, for a net increase to most.

It's a non-transparent shell game they like to play.

[Poindexter]

The report states that increase in the payroll tax will bared by the employee with reductions in wages or other compensation within 2 years. That's half of increase in tax they're claiming. The other half assumes that the elimination of some tax credits such as income splitting will be evenly bared by the entire tax bracket. Without those two assumptions, the average middle income earner will see a reduction in taxes between $135 and $739.

[rustled]

The report states that increase in the payroll tax will bared by the employee with reductions in wages or other compensation within 2 years. That's half of increase in tax they're claiming. The other half assumes that the elimination of some tax credits such as income splitting will be evenly bared by the entire tax bracket. Without those two assumptions, the average middle income earner will see a reduction in taxes between $135 and $739.

The federal income tax rate makes it look like the average family will pay less taxes, but you'd have to ignore the effect of the increase in all other federal taxes and the elimination of federal tax credits available for these families. (In affect, you are assuming most families are not helped by these, when the table shows the average family is helped by these. So some more, some less, but on average...)

This table shows each of the middle three quintiles is paying more, with quintile 3 (not 4!) shouldering the largest increase. (Even the lowest quintile sees an average per-family increase of $50.)

As I mentioned above, any $ increase for the lower quintiles represents a greater hardship than the same $ increase for a higher quintile.

No matter how you slice it, the net result for the three middle quintiles is a net increase in federal taxes paid.

[Poindexter]

any $ increase for the lower quintiles represents a greater hardship than the same $ increase for a higher quintile.

On this we can agree.

Still believe that some of the assumptions overestimate the costs beared by the typical middle income family. Costs such as payroll tax and income splitting will be passed along but not in a uniform manner. For example, I'm self employed so don't pay payroll tax, I not the recipient of income splitting and I don't receive child tax credits, I'm personally coming out ahead. At the end of the day I suppose it's all in the eye of the beholder. Just don't think studies should be skewed and assumptions made that make things sound worse than they are to purposely mislead.

[hobbyguy]

Only 25% of families with couples and children in quintiles 1 & 2 benefited from income splitting.

Income splitting does nothing for single parents, nor single folks, nor families where both partners make similar incomes.

Overall, income splitting benefited about 2 million out of 14 million households. So the effects the Fraser Institute (who ARE anti-tax ideologues) stated are waaay overblown.