Justin Trudeau has unveiled the Liberal alternative to the Harper government's economic plan: hike taxes for the wealthiest one per cent to pay for more generous child benefits and an across-the-board income tax cut for the middle class.
Under the Liberal proposal announced Monday:
- The 22-per-cent tax rate for anyone with a taxable annual income between $44,701 and $89,401 would be cut to 20.5 per cent.
- A new tax bracket of 33 per cent would be imposed on those with taxable incomes over $200,000 a year. The current top bracket of 29 per cent would continue to apply to those earning between $138,586 and $200,000.
- The Conservatives' newly enriched universal child care benefit would be replaced by rolling together two other existing child benefits into a single, more generous, monthly, tax-free "Canada child benefit."
- The Conservatives' income-splitting tax credit would be scrapped.
- The near doubling of the tax-free savings account contribution limits announced in the federal budget would be cancelled.
"We can do more for the people who need it, by doing less for the people who don't," Trudeau said at a campaign-style event at a family restaurant in nearby Aylmer, Que.
According to the Liberals, all families with kids under 18 and an annual income below $150,000, or 90 per cent of families,would receive more under Trudeau's plan than they do under Prime Minister Stephen Harper's.
Monday's announcement puts in place a central pillar of the Liberals' eventual platform for the fall election. And it is a reply to last month's Conservative pre-election budget, which pivots around twin measures to allow parents with children under 18 to split their income for tax purposes and to expand and enrich the universal child care benefit.
"Canada has always done well when most Canadians are doing well — when we have a strong and successful middle class," Trudeau told the crowd. "The fact is, over the past 10 years, Mr. Harper's plan has failed. We are not getting the economic growth, and we're not getting fairness and success for the middle class."
Asked about Trudeau's announcement during his own press conference in Sept.-Îles, Que. Monday, NDP Leader Tom Mulcair said inequality in Canada is at an all-time high because of cuts to corporate taxes.
"That increase in inequality in Canada is the result of wrong-headed choices by the Conservatives and the Liberals," Mulcair said. "Liberals and Conservatives have given tens of billions of dollars in tax reductions to Canada's largest corporations, while increasing inequality in society."
Mulcair said creating good jobs is the best way to help the middle class.
New monthly child benefit
Trudeau has previously promised to scrap the $2 billion parental income-splitting scheme, which numerous economists and think tanks have said will benefit less than 15 per cent of Canadian families, primarily the wealthiest.
He is now promising to do away with the Tory-introduced universal child care benefit as well, contending that it makes no sense to dole out equal benefits to rich and poor families alike.
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The Conservative government has just boosted that benefit to $160 from $100 a month for each child under the age of six. And it has expanded the program to give families $60 a month for every child between six and 17.
Trudeau proposes to roll together and enrich two other existing benefits that are geared to income — the Canada child tax benefit and the national child benefit supplement — into a single, enriched benefit that would give families up to $6,400 annually for every child under six and up to $5,400 for children aged six to 17.
The benefit level would be tied to family income and would gradually disappear at higher income levels.
The benefit would be "simple, meaningful, monthly and tax-free. But most of all, it will be fair," Trudeau said.
Trudeau has promised that the eventual Liberal platform will be fully costed and designed within the framework of a balanced federal budget.
Cancel TFSA contribution hike
His proposed changes to tax brackets would be revenue neutral — a tax cut of $3 billion a year for the middle class counterbalanced by an additional $3 billion in taxes on the wealthy, the Liberals said.
However, Trudeau's proposed new child benefit would cost the federal treasury an additional $4 billion a year. That would be paid for, in part, by scrapping the Harper government's $2-billion parental income-splitting scheme.
Trudeau has also promised to reverse the recently announced plan to almost double the amount people can sock away annually in tax-free savings accounts — another measure Trudeau maintains will primarily benefit the wealthy.
That would give him another $1 billion immediately — and potentially billions more over the longer term — to finance his own program.
But Employment Minister Pierre Poilievre said that by canceling the increase to TFSA contribution limits, the Liberal plan raises taxes on Canadians earning less than $60,000. The government says two-thirds of TFSA account holders are middle-income earners.
Poilievre told reporters on Parliament Hill Monday that the Conservative government's plan gives tax breaks and child care benefits to all Canadians.