BUDGET
Income tax
Small changes, big benefit
Figuring out how ordinary Canadians benefit from the budget
Last Updated: Thursday, January 29, 2009 | 11:29 AM ET
By Philip DeMont, CBC News
IN DEPTH: Federal budget 2009
- YOUR VIEW: What in this budget most affects you?
- CITIZEN BYTE: Daycare? A single parent reacts to the budget
- YOUR VOTE: How does this budget help you?
- CITIZEN BYTE: A young man shares story of economic success in his town
- MAP: Reaction to the 2009 Budget
- VIDEO: Margo McDiarmid reports: Ignatieff puts Tories 'on probation' with budget demand
- VIDEO: The National's economic panel shares its thoughts on the budget (Jan. 27)
- VIDEO: Marivel Taruc reports: Mixed feelings on the budget from the business community
Documents
- Full federal budget
- Complete budget documents at Ministry of Finance website
- Economic action plan
- Overview of economic stimulus
- Home renovation tax credit
- Eligibility and time frame
- Taxes
- Personal income tax, homeowners taxes
Analysis
- Bad-times budget delivers billions in tax cuts, spending
- How the spending breaks down
- Where the money is coming from
- Where the money is going
- VIDEO: Peter Mansbridge interviews Jim Flaherty after the budget speech
- INFRASTRUCTURE MAP: What the provinces were looking for, and what the federal budget delivered
- INTERACTIVE: Budget by the numbers
- Few surprises as government turns on the spending taps
- Flaherty vows tax cuts, incentives for homeowners
- VIDEO: What's in the budget for homeowners
- Conservatives make plans for national securities regulator
- $12B for infrastructure forms key pillar of stimulus package
- VIDEO: Details of the infrastructure spending package
- Forestry association welcomes budget; union angered
- Unemployed workers get boost in budget
- VIDEO: Budget provisions for unemployment
- All maxed out? Budget measures would improve credit access
- Environment gets lift in budget pledges
- Funding for arts and sciences still on the bill
- Budget allocates $438M to cultural spending
- Houses, Arctic research facility among budget goodies for North
- Early reviews mixed from Ignatieff; more expected Wednesday
- Budget sparks mixed reaction from mayors
- Federal budget calls for partnership from provinces: B.C. premier
- Alberta cities, province optimistic about federal budget, but need more details
- Calgary mayor encouraged by stimulus budget
- Saskatchewan seeks more details about federal budget
- Quebec argues Ottawa shorted province $1B in federal budget
- Defeat PM over 'vindictive, nasty' budget, N.L. premier tells Liberals
- Matching infrastructure funds a struggle for P.E.I.: Treasurer
- COLUMN: Keith Boag - Will a little red ink buy Harper the time he needs?
- VIDEO: Neil Macdonald on the track record of government stimulus spending (Jan. 26)
- PROFILES: The finance minister's advisory council
- MYTH/FACT: PM Harper's 2008 economic comments
- ARCHIVES: Looking back at notable budgets of the past
- IN DEPTH: The Bottom Line - things you need to know to weather the turbulent economy
Features
- The demise of the secret budget
- Debate heats up about Ottawa's stimulus strategy
- Evaluating Ottawa's tax-strategy options
- Deficit spending - the return of red ink
Sector by sector
- Bailout ready to go, but auto sector takes its cues from Detroit
- Waiting for a 'jobs' budget
- Health care: How to blow a bundle and be better for it
- Military spending: Funding the Forces
- Ailing forestry industry asks for help in federal budget, not a bailout
- Is Canada the answer to U.S. energy worries?
- AUDIO: Alison Myers reports: The oil industry's wish list for the budget (Runs 1:36)
- Carbon capture: How easy is it to nab greenhouse gases at the smokestack?
- YOUR MONEY: How the economy is affecting you
Most governments have a hard time making a public splash when they cut taxes. For voters, spending increases can be boiled down to a boost for a particular program or at least one big number in a headline.
Reducing taxes, however, is usually increasing a tax credit by a little bit here and dropping a specialized rate by a marginal amount there. Thus, cutting a family's taxes often does not get Ottawa many kudos even if the results can make a financial difference.
Finance Minister Jim Flaherty's Jan. 27 budget is no different as the Conservative government introduced a number of small tax changes that, experts say, add to decent savings on a family's bottom line.
But the actual dollar amounts involved are not likely to knock anyone's socks off.
The government raised the income exemption before the higher tax rate is applied but only by $723.
Flaherty boosted the federal child benefit resulting in a $400 gain for low-income families, which drops to about $50 for middle-income earners.
"It's not a whole lot of anything," said Gena Katz, executive director in tax for the Toronto office of accounting firm Ernst & Young. "But these are the right things to do."
Katz took four different families and calculated the gain each couple would receive from the higher income levels at which heavier taxation rates apply, the main plank in the Conservatives' personal income tax changes.
For instance, a person now must make $40,726 annually before their tax rate rises from 15 per cent to 22 per cent. That represented a modest jump from 2008's income level of $37,885.
Middle-class couple with no kids
With this budget, Prime Minister Stephen Harper's government has targeted middle-class Canadians as the group that he wants to start spending again. Getting them to spend more is crucial, since they represent approximately 50 per cent of total personal income in Canada.
The example presumes each person earns $50,000.After adjusting the couple's tax bill for the higher exemption levels, Katz calculates the pair saves $322 in yearly taxes.
Ottawa did its own calculations, although not for this particular family.
Including the changes in the latest budget, a person making $100,000 will save $731 in reduced taxes since the Conservatives came to power in 2006, according to the Department of Finance.
Middle-class couple with 2 kids
The budgetary savings are the same for a middle-class couple with two children is about $322. (Jonathan Hayward/Canadian Press)This is the crowd that political observers tend to believe vote Conservative, making this group of prime importance to the minority government.
Harkening back to the Katz-o-meter, the budgetary savings are the same for this couple — $322, as it was for the couple with no children. The bare-bones calculation found the budget does not save a couple with kids any more money than the childless pair.
Still, the federal government estimated that a family with two kids earning $60,000 will save $66 in taxes next year from other changes, and has already saved $1,364 since 2006.
The budget did include extra help for low-income Canadians with kids, and those parents who have to shuffle their toddlers to daycare everyday.
Lower-income couple with 2 kids
Here, the government hiked its existing National Child Benefit Supplement to allow low-income families to earn an extra $1,894 in take-home cash before Ottawa starts clawing back this benefit.
Just focusing on the income changes, however, Katz estimated that, in a low-income family with $60,000 in total income, each person saves $66, or $132 for the pair.
'The government has done a number of things that are OK.'—Gena Katz, Ernst & Young
Further down the income ladder, this budget will save a couple making $20,000 about $539, for a total of $855 since the Conservatives came to power.
Katz pointed out, however, that the government has already introduced a number of measures that could reduce this family's tax bill, provisions such as a tax credit for taking public transit and the ability to deduct a child's sports fees from the family's income.
"The government has done a number of things that are OK," she said.
Senior couple
The new provisions in the budget will save some senior couples about $632. (Reed Saxon/Associated Press)This group could be the hidden lodestone in terms of helping the economy, Katz said.
"Seniors are pretty good spenders," she said.
After all, in most cases, the kids have grown, the house is paid off and their living expenses are relatively low.
Take a couple with each person getting $50,000 annually, typically through pension income, investment returns — although not a great source of cash these days — and government payments.
At that income level, the couple will save a decent amount, $632, from the new income provisions in Flaherty's budget. The government estimated that, compared to 2006, this senior couple is now saving $1,782 through reduced taxes.
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