INDEPTH: FEDERAL BUDGET 2006
Personal Tax Measures
CBC News Online | May 2, 2006
The Conservative government made good on some of its main election tax promises Tuesday, cutting the GST by one percentage point in July and offering almost $20 billion in tax relief for individuals over the next two years.
The budget "delivers more than twice as much tax relief as new spending," Finance Minister Jim Flaherty said in a copy of his speech released before he rose to deliver the budget in the House of Commons.
The measures include:
- The goods and services tax (GST) will be cut by one percentage point, to six per cent, effective July 1. Estimated cost to the government: $3.5 billion in 2006-07 and $5.17 billion in 2007-08.
- The lowest personal income tax rate, which applies to all income earned up to a threshold of about $36,400, will rise to 15.5 per cent effective July 1. The 15-per-cent rate introduced by the Liberals in November 2005 will apply on income earned from Jan.1 until June 30, 2005. Estimated cost: $1.67 billion in 2006 and $1.37 billion in 2007.
- A new Canada employment credit will be instituted on employable income up to $500, effective July 1, applied to help cover the cost of such things as home computers, uniforms and supplies required for work. That means the credit available for 2006 will be $250, because the measure is being imposed midway through the year. The credit limit is to increase to $1,000 for the 2007 tax year. Estimated cost: $890 million in 2006, $1.8 billion in 2007.
- The basic personal exemption, the amount Canadians can earn before paying federal income tax, will increase to $10,000 by 2009, the same target as in the Liberal economic statement last November. For the 2005 tax year, the government will keep the Liberal cut of $500, which made the basic personal amount $8,648. In 2006, the exemption will rise for the first six months to $9,039 but will be cut by $400 on July 1, when the GST is reduced, to result in an end-of-tax-year average of $8,839. Estimated cost: $1 billion in 2006, $500 million in 2007.
- The maximum eligible amount for the pension income credit will rise to $2,000 from $1,000, starting in the 2006 tax year. Estimated cost: $490 million in 2006-07, $405 million on 2007-08.
- Middle- and high-income families will become eligible for the child disability benefit of up to $2,044 a year, effective July 1. Estimated cost: $35 million in 2006-07; $45 million in 2007-08.
- People donating ecologically sensitive land or publicly listed securities to charities will no longer have to pay capital gains tax. Estimated cost: $5 million in 2006-2007 and the following fiscal year.
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