Saskatoon

Lower Sask. personal and corporate income tax rates kick in Saturday

An economist with University of Regina says the Saskatchewan government has a point when it says lowering personal and corporate income tax rates can help stimulate the economy.

Government says lower rates will encourage productivity; economist agrees

Both personal and corporate income tax rates in Saskatchewan are going down effective Saturday. (Chris Young/Canadian Press)

An economist with University of Regina says the Saskatchewan government has a point when it says lowering personal and corporate income tax rates can help stimulate the economy.

Personal and income tax rates are set to go down on Saturday, as part of the continued rollout of the provincial government's 2017-2018 budget.

Personal income tax rates will drop by half a percentage point Saturday (and another half-percentage point two years from now).

As a result, a family of four's personal income tax will be $468 lower in 2020 compared to 2016, according to the government.

Also on Saturday, the province's reduced corporate tax rate (11.5 per cent from 12 per cent) will go into effect. Another half-point decrease, planned for July 1, 2019, will knock it down to 11 per cent.   

Could encourage investment: prof 

But will the changes actually lead to economic growth, as the province suggests?

Jason Childs, an associate professor of economics at the University of Regina, says lower rates might indeed encourage people to work harder.

And the same effect can work on companies.

"When you lower the corporate income tax rate, [you] can keep more," he said. 

"So if I'm a corporation, selling an extra unit of product, seeing an extra client, all those things become more interesting to me when I get to keep more of the benefit of my activities."

He added that lower rates could encourage businesses to make investments or expand their operations.

NDP reminds of PST hike

But the Saskatchewan NDP caucus called out the government for its boasts.

It says the parallel hiking of the provincial sales tax by one percentage point (to six per cent) — and the broadening of the tax to items that were previously untaxed — will offset any benefits from the lowered income tax rates.

"They neglected to mention the impact of their billion-dollar PST hike that will force Saskatchewan families and businesses to pay more in taxes on nearly everything they buy, from kids clothes to insurance and even a case of beer," a release from the caucus stated.

According to the budget, the government is expecting to take in $2 billion in PST revenue this fiscal year.

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