81 per cent of middle-class families pay more
in personal income taxes now
#LSN_Opinion middle-class families pay more
THUNDER BAY, ONTARIO, - October 30, 2017 (LSN) In a recent commentary in the Financial Post titled “Misleading the middle class,” Simon Fraser University professor Rhys Kesselman criticized our analysis of how federal tax policy changes have increased the amount of income tax paid by middle-class families. Prof. Kesselman doesn’t contest, refute or disprove our tax analysis but rather—in parroting the Trudeau government’s talking points—conflates taxes and transfers, and completely misses the point of what our analysis set out to do.
If you have not followed this debate, here’s some quick background. On the campaign trail and since coming to power, Prime Minister Justin Trudeau, his finance minister, and other federal officials have repeatedly claimed that the government cut income taxes on middle-class families. As just one example, the federal government’s first budget declared “the government cut taxes for middle class Canadians everywhere.”
As part of an organization focused on measuring the effects of government policy, my Fraser Institute colleagues and I set out to test this specific claim to see if, in fact, the government lowered income taxes on middle-class families. We found this wasn’t the case for the vast majority.
While the government did reduce the second-lowest personal income tax rate (from 22 per cent to 20.5 per cent), it also eliminated a number of tax credits (provisions in the tax code that reduce a person’s income taxes, if they qualify), thereby increasing income taxes for Canadians who previously claimed such credits. Specifically, the government eliminated the income-splitting tax credit for couples with young children, the children’s fitness tax credit, the public transit tax credit, the education tax credit and the textbook tax credit.
When all the income tax changes are considered, 81 per cent of middle-class families pay more in personal income taxes now because of the Trudeau government’s tax changes.
When confronted with our findings, the government did not dispute them. Instead, it shifted the goal posts and tried to dismiss them by saying the analysis didn’t account for the enhancement made to the Canada Child Benefit, a government transfer program. And now, Prof. Kesselman is parroting the government’s response.
As Canada’s Research Chair in Public Finance, Prof. Kesselman should know better. Taxes and transfers are not the same thing. Cutting taxes leaves Canadians with more of their own money. Increasing transfers gives Canadians more of other peoples’ money. There is a significant difference.
And more importantly, we focused on taxes because the government’s claim, which it repeats over and over again, was that it cut income taxes on the middle class. By now invoking increased transfers, both the government and Kesselman implicitly acknowledge the validity of our results.
All of this emphasizes the importance of our analysis, which brought key evidence to bear on what was a cornerstone commitment of this government to cut income taxes on the middle class. And this evidence has helped Canadians understand the reality of Ottawa’s tax changes, which run contrary to the government’s rhetoric.
The government has now changed its messaging on this issue. Yet Prof. Kesselman tried to dismiss our study with the same erroneous criticism. That’s disappointing, and does a disservice to readers and Canadians more generally.
By Charles Lammam
The Fraser Institute