Liberal government passes 'middle-class' tax cut
Prime Minister Justin Trudeau, right, and Finance Minister Bill Morneau have launched the government's new tax plan. (Sean Kilpatrick/
With motion now passed by the House of Commons, the Canada Revenue Agency will implement the changes By James Fitz-Morris,
CBC News Posted: Dec 09, 2015 11:59 AM ET Last Updated: Dec 09, 2015 3:54 PM ET
The paycheques of nearly a third of Canadian workers will look a little different in the New Year.
The House of Commons made official today the government's "middle-class tax cut" and corresponding tax-hike for the "one per cent." Both will kick in on Jan. 1
With the passing of the motion — called a ways and means motion — the tax rate for the second income bracket will drop to 20.5 per cent from 22 per cent in 2016.
That bracket will catch all income between $45,282 and $90,563. The savings translates to a maximum of $680 for those with income at the top of the range and beyond.
The changes also create a new bracket for income above $200,000 with a rate of 33 per cent. The previous top rate of 29 per cent will still apply to all income between $140,388 and $200,000 in 2016.
NDP Leader Tom Mulcair pointed out those making just shy $200,000 a year — said by the Liberals to constitute top "one per cent" of income earners — will be among those who benefit most from the changes being made.
"What they are doing is giving a tax-break to people who earn 200,000 bucks a year and leaving out a family with two kids earning 45 grand a year," Mulcair said during question period Wednesday. "They are the middle class, they are the ones who should have gotten help. The rest is a chimera."
Nonetheless,
NDP MPs voted in favour of the motion because they support raising taxes on high-income earners.
The motion passed by a vote of 230 to 95.
Conservative MPs voted against the motion, which also drops next year's planned increase to contribution limits for tax free savings accounts.
The previous Conservative government had changed the law to boost cumulative annual contribution limits to TFSAs by $10,000 per year effective in 2015. As they promised, the Liberals have dropped next year's increase back to $5,500.
The Conservatives say the move will deny seniors an important tool to protect their savings.
Finance Minister Bill Morneau points out that only 6.7 per cent of TFSAs holders hit their contribution limits. "That means 93.3 per cent were unable to use the [existing] maximum," he said in defending his government's position.