# Summary of Liberal Personal Finance Policies



## Woz (Sep 5, 2013)

With the new Liberal government, I thought I’d summarize the campaign promises that would impact Canadians’ personal finances. Let me know if I missed anything.


$10,000 TFSA limit without indexing reverted back to $5,500 with indexing

Income tax rate of 22% between $44,701 and $89,401 lowered to 20.5%. Income tax rate of 29% increased to 33% above $200,000

Income splitting for families with a child under 18 removed. Previously capped at a maximum $50,000 of income transfer and $2,000 of tax savings.

Overhaul of child benefits. NCBS, CCTB, and UCCB replaced with new CCB. 
NCBS tax free benefit of $2,279 for first child, plus $2,016 for second, and plus $1,918 for third. 12.2% phase out for income >$26,021 (1 child), 23% phase out for 2 children, 33.3% for 3 or more children. 
CCTB tax free benefit of $1,471 per year. 2% phase out for income >$44,701 (1 child), 4% phase out for 2 or more children.
UCCB taxable benefit of $1,920 per year per child under 6, $720 per year per child over 6.
CCB tax free benefit of $6,400 per year per child under 6, $5,400 per year per child over 6. For 1 child, 6.8% phase out for income between $30,000 and $65,000, and 3.1% >$65,000. For 2 children, 13% phase out for income between $30,000 and $65,000, and 5.5% >$65,000.

The chart below shows the benefit/cost at various family income levels. In general, breakeven is at ~$150k family income if you have 1 child and ~$160k if you have 2 children. If you make less than that you'll benefit if you make more then it'll cost you.








EI premiums lowered from 1.88% to 1.65% (Conservatives were proposing to further lower premiums to $1.49%. Maximum annual insurable earnings are $50,800 for 2016.

Remove the first time home buyer restriction on using the home buyer’s plan to withdraw up to $25,000 from your RRSP for significant life events such as job relocation, the death of a spouse, marital breakdown, or a decision to accommodate an elderly family member. Previously you needed to have not owned your principal residence for 4 years prior, in order to use the HBP. Note: the Conservatives were planning to increase the HBP to $35,000.

OAS eligibility will remain at 65. Previously OAS eligibility was going to gradually increase from 65 to 67 between 2023 and 2029.

10% increase to GIS. GIS ranges from $6,149 to $9,274 per year depending on marital status and whether you receive full OAS. It is clawed back at a 50% rate and reduced completely at an income level ranging from $17,280 to $41,424 (combined income) depending on marital status and whether you receive full OAS.

OAS and GIS will be indexed based on a new Seniors Price Index. Seemingly this will be at a higher rate than the consumer price index.

Increase GST rebate on the purchase of residential rental properties to 100% of GST. It’s currently 36% of GST and is phased out between a purchase price of $350,000 and $450,000. It’s unclear what will happen to the cap.

Enhanced CPP. Details are unclear, but if it's like the proposed ORPP it would be a 1.9% premium for each the employee and employer up to $90,000 income. Currently CPP premiums are 4.45% for employee and employer up to $53,600. Maximum CPP is $12,780 per year and ORPP looks to target a ~60% increase.

Small business tax rate lowered from 11% to 9%.

Student loans frozen and not accumulating interest until you earn $25,000. Currently, student loans are frozen for 6 months after you finish school, but interest still accrues.

Increased the maximum Canada Student Grant for Students from Low-Income Families from $2,000 to $3,000 for full-time students and $1,200 to $1,800 for part-time students.


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## none (Jan 15, 2013)

Sigh - why do i get annoyed when the government pelts me with more money? Personally I'd rather it go to debt reduction, better environmental monitoring and enforcement, tax payer funded university education and/or infrastructure.


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## sags (May 15, 2010)

But they have plans for some of that..........

Students will have student loan repayment frozen until they earn $25,000 per year (education)

There will be millions spent on workplace training programs for unemployed youth (education).

There will be a big increase in infrastructure spending, the development of alternative energy, and scientific research (jobs)

Marijuana will be legalized and taxed. (jobs and revenue).

CBC will have their funding restored (jobs)


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## humble_pie (Jun 7, 2009)

Woz said:


> With the new Liberal government, I thought I’d summarize the campaign promises that would impact Canadians’ personal finances. Let me know if I missed anything.
> 
> 
> $10,000 TFSA limit without indexing reverted back to $5,500 with indexing
> ...




excellent work, bravo!

this should become a sticky
everybody needs this as a reference base

.


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## fatcat (Nov 11, 2009)

i like the oas changes and gis changes
people that work in factories are ready to quit at 65 but professionals often enjoy working well beyond 65
they should incentivize getting it later (as they now do but with a better deal)
a cost of living based on how seniors live is brilliant
i'd like to see a low-income communications package that included tv, phone and internet for over 65 low income

i'd like to see a means tested childcare program


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## tlar (Dec 3, 2012)

> In general, breakeven is at ~$150k family income if you have 1 child


So if our family has one child under 6 and our household income is 170K but we put 20K into RRSPs will the new CCB be calculated on the pre or post RRSP income?


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## Ihatetaxes (May 5, 2010)

Good summary.

Negative impact for my family and my business but really not worth complaining about when we are making more than 99.8% of Canadian families. With the business I will just take less salary, more dividends and invest more inside one of the hold co's.

Life has been very good for me under Harper and I am sure life will be very good for me under the hippie hair model youngster.


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## none (Jan 15, 2013)

Ihatetaxes said:


> Good summary.
> 
> Negative impact for my family and my business but really not worth complaining about when we are making more than 99.8% of Canadian families. With the business I will just take less salary, more dividends and invest more inside one of the hold co's.
> 
> Life has been very good for me under Harper and I am sure life will be very good for me under the hippie hair model youngster.


Nice way to look at it


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## Woz (Sep 5, 2013)

tlar said:


> So if our family has one child under 6 and our household income is 170K but we put 20K into RRSPs will the new CCB be calculated on the pre or post RRSP income?


Can't say for sure, but I'd assume it will be calculated the same way as the current child benefits, so it'd be you net income on your tax return (line 236) which is your income from all sources (interest, dividends, capital gains, etc.) minus deductions such as RRSP. In your example I'd expect your net income for qualifying would be $150k.


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## sags (May 15, 2010)

fatcat said:


> i like the oas changes and gis changes
> people that work in factories are ready to quit at 65 but professionals often enjoy working well beyond 65
> they should incentivize getting it later (as they now do but with a better deal)
> a cost of living based on how seniors live is brilliant
> ...


I'd like to see an option for seniors to accept a little less OAS for life in exchange for a lifetime VIA rail pass.

People would use it when they are younger and can, but continue to pay for it in later years when they aren't traveling anymore.

It would provide cheap rail travel for seniors to explore Canada coast to coast, provide steady income for VIA rail, and encourage Canadians to spend tourist dollars in Canada.


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## Woz (Sep 5, 2013)

I'll add a couple additional ones based on some of the comments.

Small business tax rate lowered from 11% to 9%.

Student loans frozen and not accumulating interest until you earn $25,000. Currently, student loans are frozen for 6 months after you finish school, but interest still accrues.


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## CPA Candidate (Dec 15, 2013)

Interesting - when the Conservatives increased the monthly taxable child benefit this past year it was labeled as cynical vote buying. The entire liberal fiscal platform gives juicy tax cuts and increased benefits across the board, except for high earners. I'll be getting more money for having a child and lower taxes (I won't spend it though!). 

I think the small business tax cut is generally a bad idea. This lower tax rate is already abused by owners who don't use it in the spirit it was intended, reinvestment in the business, and rather as an vessel to defer taxes and stay small. Small businesses generally give the minimum level of employee salary and benefits while the owners do very well. I worked for a small business where the owner drove a $200,000 car to work while most employees were barely surviving - and he was exploiting the SBD to fullest extent. It's time to stop small business worship. I'm back in a larger business now and would never consider going back to working for a small business.


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## fatcat (Nov 11, 2009)

sags said:


> I'd like to see an option for seniors to accept a little less OAS for life in exchange for a lifetime VIA rail pass.
> 
> People would use it when they are younger and can, but continue to pay for it in later years when they aren't traveling anymore.
> 
> It would provide cheap rail travel for seniors to explore Canada coast to coast, provide steady income for VIA rail, and encourage Canadians to spend tourist dollars in Canada.


at what age would they get the pass and what would it cost them ?

i looked at going across canada by train in nice sleeper and it was not cheap


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## fatcat (Nov 11, 2009)

Woz said:


> I'll add a couple additional ones based on some of the comments.
> 
> Small business tax rate lowered from 11% to 9%.
> 
> Student loans frozen and not accumulating interest until you earn $25,000. Currently, student loans are frozen for 6 months after you finish school, but interest still accrues.


both are excellent ideas, student loans need reform badly


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## Butters (Apr 20, 2012)

mention of CBC funding (jobs)

what about Canada Post, at first Liberal said they would hold real consultations and look into it more... but I believe Liberal took on the same attitude as NDP towards the end of the election saying it would restore door to door delivery and the 8,000 jobs associated with it


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## fatcat (Nov 11, 2009)

SheaButters said:


> mention of CBC funding (jobs)
> 
> what about Canada Post, at first Liberal said they would hold real consultations and look into it more... but I believe Liberal took on the same attitude as NDP towards the end of the election saying it would restore door to door delivery and the 8,000 jobs associated with it


i hope they take a pass ... door to door is toast (not saying it will disappear, just saying that based on cost/benefit and viability it is finished as business model and should disappear) any attempt to fund this is just a handout to cupw who will only ask for more when their outmoded, too-costly business model runs into more problems


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## HaroldCrump (Jun 10, 2009)

^ yes, door to door delivery is being restored.
CBC just won the lottery last night as well....


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## andrewf (Mar 1, 2010)

The most refreshing thing about the Liberals winning is that after 9 years, I can go back to criticizing the government for being too left wing.

I don't like the idea of OAS/GIS indexing to a higher inflation rate--that sounds potentially dangerous. 
I'm also cautious about the student loan program. I think interest should be at least inflation (ie, debt remains the same in real terms).


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## humble_pie (Jun 7, 2009)

HaroldCrump said:


> ^ yes, door to door delivery is being restored.
> CBC just won the lottery last night as well....



don't you think that delivery twice a week would be enuf? this would save a bundle.

delivery twice a week is all we get on my street anyhow. The postie sorts, leaves most of the mail for tomorrow or the next day, takes only a light load out on the route.

to make matters even more picturesque, the posties in this town rent routes to each other. With only half a route to deliver, a postie can easily do 2 routes in one day. 

but i suspect they're all getting paid for full days.

so i'm wondering, Why not make all this legit? delivery once a week would be fine. All useful mail that isn't e-posted is sent via express post or courier anyhow.


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## fatcat (Nov 11, 2009)

humble_pie said:


> don't you think that delivery twice a week would be enuf? this would save a bundle.
> 
> delivery twice a week is all we get on my street anyhow. The postie sorts, leaves most of the mail for tomorrow or the next day, takes only a light load out on the route.
> 
> ...


they get to go home when they have finished their route but get paid right up to their official stop time which could be an hour or more later

the fact that there is a crush of applications when one of these jobs open up tells you how overpaid they are

fine, keep door to door and drop the delivery days to 2 or 3, i don't care but something must be done to remain competitive

i promise you that if you suggest 2 or 3 days delivery the union will have a reason why this a bad idea also


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> I don't like the idea of OAS/GIS indexing to a higher inflation rate--that sounds potentially dangerous.


That's not even the half of it...IMHO, resetting the eligibility age back to 65 has serious long-term implications.
None of this has been costed out because OAS comes out of general tax revenues.

From a purely political perspective, I agree with this change to set it back to 65, given the fact that public sector fatcats are retiring at 50 with full DB pensions + CPP bridge, while private sector serfs are condemned to work till 67.
Raising OAS age to 67 should be concomitant with freezing minimum public sector retirement age to 67 as well.


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## sags (May 15, 2010)

Great idea Humble..........

Reduce the deliveries to a couple days a week to cut costs, but seniors would still get their mail delivered and there wouldn't be the traffic snarls around group post office boxes.

I would also introduce it over the time it took for natural attrition to take place among postal workers. There is no rush to push them into unemployment lines.


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## HaroldCrump (Jun 10, 2009)

Woz, this is super cool.
Thanks for pulling this together.


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## sags (May 15, 2010)

fatcat said:


> at what age would they get the pass and what would it cost them ?
> 
> i looked at going across canada by train in nice sleeper and it was not cheap


Don't know what the numbers would have to be.......but coach fares would be fine in the view that people can disembark and stay overnight along the way if they wish.

What would $20 per month per person add up to...........versus the cost to Via Rail to provide the seat ? (possibly one that would otherwise be empty)

It would have to be an optional and permanent choice.

People can always take trips if they can afford to, but I am thinking this might be used more for spur of the moment types of travel.

Breakfast in Montreal..........a weekend looking at the ocean in Halifax...........type of trips.


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## sags (May 15, 2010)

HaroldCrump said:


> Woz, this is super cool.
> Thanks for pulling this together.


Agreed totally, it would be interesting to put it into a form with checkboxes.............so we could mark the Liberal progress or non progress along the way.


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## OnlyMyOpinion (Sep 1, 2013)

As I noted in another thread and based on AltaRed's suggestion elsewhere, I would not be surprised if the majority Liberals passed their income tax and TSFA changes before the end of 2015. Meaning a reduced TSFA limit effective Jan. 1, and the income tax changes in place when we prepare our 2015 income taxes.


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## humble_pie (Jun 7, 2009)

fatcat said:


> they get to go home when they have finished their route but get paid right up to their official stop time which could be an hour or more later
> 
> the fact that there is a crush of applications when one of these jobs open up tells you how overpaid they are
> 
> ...



when a postman comes to work, sorts his mail into today's delivery vs what is to be stored for tomorrow or the next day, then he rents today's route delivery to a buddy, then goes home, all this doesn't take much more than an hour.

buddy himself is only carrying half a route load for delivery on his own route, so he can easily accept another route. The follwing day or the following week, they switch. But presumably they both get paid for all day, every day.

in my town, things are a mess - several municipalities are suing - meanwhile i hear that seniors & others who so elect will be able to receive mail a t home once a week. I'm not sure if they will have to pay.

in any event, why not just gussy up that plan a little & deliver mail to everybody, at home Twice a week.

no postbox hubs or kiosks. A difficulty is that, in downtown city cores, there isn't any available real estate on which to build em.


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## nathan79 (Feb 21, 2011)

The changes to OAS and GIS will help my mom a lot.

As for the home mail delivery, it's too bad they already wasted so much money transitioning to the mailboxes. My neighbourhood was actually just about to switch in November. They must have sent us a half a dozen notices explaining everything. I think the Conservatives should not have implemented the changes before the election, knowing there was a good chance the next government would throw out the idea.


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## gibor365 (Apr 1, 2011)

> .............so we could mark the Liberal progress or non progress along the way.


 i'd say Liberal's regress


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## andrewf (Mar 1, 2010)

I would be in favour of Canada Post subcontracting delivery to private providers. I'm not sure how much waste there is in the delivery side of things (people getting paid for fulls shifts for 4 or 5 hours of work), but if it is as bad as I hear, we should be able to get some good results by outsourcing it.


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## MyCatMittens (Oct 20, 2015)

Long time lurker - surprised this is the post that FINALLY made me sign up 

Personally, I find it amusing that folks seem to have no concerns about taxing "the rich" (read: other people), yet bitterly complain about having their home mail delivery taken away. For people that have legitimate mobility issues, I would rather see Canada Post courier their mail to them on a weekly basis (as an option). I'd fail to see how this could be any less expensive than home delivery for all.

Reinstating home delivery is just punting the problem down the road. As is, I can't see how it will be viable long term.

With respect to the list above, I have absolutely no issues paying additional taxes to assist those in need. I have a bigger issue paying more and more taxes for non-essential services - when we are clearly not in a position to afford them. I have to admit, I'm somewhat surprised by the willingness of those on this forum (who I thought believed in LBYM) to have a laissez faire attitude towards more debt - and that concern goes towards all of the political parties. Easy to rack up the debt and expect a future government/tax base to pay up.


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## atrp2biz (Sep 22, 2010)

Woz said:


> Income tax rate of 22% between $44,701 and $89,401 lowered to 20.5%. Income tax rate of 29% increased to 33% above $200,000


For someone earning in the highest marginal tax rate, earnings would have to exceed $216,762 to actually end up having to pay more taxes.

($89,401 - $44,701) x 1.5% = $670.50

$670.50 / (33% - 29%) = $16,762

So it looks like anyone making less than $217k per year will be getting a tax break. I would hardly call someone earning $217k to be middle class. I actually don't mind paying taxes (doesn't mean I'll pay more than I have to) and would rather have seen tax increases for the $89,401 to $1xx,xxx bracket. The Liberals are leaving a lot of revenue on the table with these cuts--not sure how everything is going to add up...wait a second, that's what it doesn't!


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## 5Lgreenback (Mar 21, 2015)

Lets not forget about the Carbon tax(es), which will apply to every income level, and likely lead to increased inflation on everything we purchase.


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## andrewf (Mar 1, 2010)

At this juncture, talking about a federal carbon tax is just fear mongering. But then, I would prefer a federal carbon tax to cap and trade, as long as the proceeds are used to offset other taxes & refundable credits to ensure equity.


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## agent99 (Sep 11, 2013)

> Income tax rate of 22% between $44,701 and $89,401 lowered to 20.5%. Income tax rate of 29% increased to 33% above $200,000





atrp2biz said:


> So it looks like anyone making less than $217k per year will be getting a tax break.


I don't understand it that way.

The way that I read the plan was that those with taxable income in the $44,701-$89,401 range would get a 1.5% reduction in tax rate. For those with incomes from $89,401 to $200k there would be no change from current rates. Over $200k, there would be a new new bracket that would attract a 4% increase in tax rate on income exceeding $200k.

Summarized by FP: http://business.financialpost.com/p...-policies-what-they-will-mean-to-you-and-when


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## andrewf (Mar 1, 2010)

Yeah, but those are marginal tax rates. Everyone earning $200k is getting a tax cut between $44k and $89k, which offsets the higher tax they pay above $200k. The breakeven point between the current and new system is $217k as atrp2biz calculated.


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## agent99 (Sep 11, 2013)

andrewf said:


> Yeah, but those are marginal tax rates. Everyone earning $200k is getting a tax cut between $44k and $89k, which offsets the higher tax they pay above $200k. The breakeven point between the current and new system is $217k as atrp2biz calculated.


Yeah - It just dawned on me that I was missing that part and I came back to edit my post - However, it assumes taxes will still be calculated in same way, which doesn't then make much sense. We will find out!


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## none (Jan 15, 2013)

agent99 said:


> Yeah - It just dawned on me that I was missing that part and I came back to edit my post - However, it assumes taxes will still be calculated in same way, which doesn't then make much sense. We will find out!


yeah 'cause those red bastards would TOTALLY revamp the whole taxation system just to screw with Alberta.


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## andrewf (Mar 1, 2010)

agent99 said:


> YHowever, it assumes taxes will still be calculated in same way, which doesn't then make much sense. We will find out!


Huh? I don't follow.


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## GoldStone (Mar 6, 2011)

andrewf said:


> Yeah, but those are marginal tax rates. Everyone earning $200k is getting a tax cut between $44k and $89k, which offsets the higher tax they pay above $200k. The breakeven point between the current and new system is $217k as atrp2biz calculated.


You are making a leap of faith there. Liberal platform is not specific enough. They didn't spell out what happens to the two tax brackets between $89K and $200K. This makes me very suspicious. They can easily adjust the rates between $89K and $200K to keep both brackets revenue-neutral.


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## GoldStone (Mar 6, 2011)

atrp2biz said:


> For someone earning in the highest marginal tax rate, earnings would have to exceed $216,762 to actually end up having to pay more taxes.
> 
> ($89,401 - $44,701) x 1.5% = $670.50
> 
> ...


Their platform doesn't say that marginal rates between $89K and $200K will remain the same. The platform promises to lower the marginal rate between $44K and $89K. They can make some adjustments to collect the same revenue between $89K and $200K.


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## agent99 (Sep 11, 2013)

andrewf said:


> Huh? I don't follow.


IF the tax changes are implemented as described in the Liberal platform (https://www.google.ca/url?sa=t&rct=...R9niX4FVg&sig2=Id4W9sZNnVW9b9IGLM487Q&cad=rja) then what has been posted is correct. All I am saying, is that once they start to implement that platform, changes may be required to make things work. The intent was to help just the middle class.


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## Woz (Sep 5, 2013)

GoldStone said:


> Their platform doesn't say that marginal rates between $89K and $200K will remain the same. The platform promises to lower the marginal rate between $44K and $89K. They can make some adjustments to collect the same revenue between $89K and $200K.


On the last page of their middle class tax cut plan they show all the proposed tax brackets. Nothing about a change between $89k to $200k.
https://www.liberal.ca/files/2015/05/Fairness-for-the-Middle-Class.pdf


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## GoldStone (Mar 6, 2011)

Woz said:


> On the last page of their middle class tax cut plan they show all the proposed tax brackets. Nothing about a change between $89k to $200k.
> https://www.liberal.ca/files/2015/05/Fairness-for-the-Middle-Class.pdf


Yet they never mentioned that a marginal rate cut in the bracket #2 would benefit everyone up to 200K. Was it just an election tactic? _"We are going to help the middle class"_ plays so much better than _"We are going to help the middle class, and by the way, that includes everyone up to 200K"._


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## andrewf (Mar 1, 2010)

agent99 said:


> IF the tax changes are implemented as described in the Liberal platform (https://www.google.ca/url?sa=t&rct=...R9niX4FVg&sig2=Id4W9sZNnVW9b9IGLM487Q&cad=rja) then what has been posted is correct. All I am saying, is that once they start to implement that platform, changes may be required to make things work. The intent was to help just the middle class.


Well, it's always possible that they will do something other than what they described in their platform (perish the thought), but at this point that is just speculation.


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## GoldStone (Mar 6, 2011)

andrewf said:


> Well, it's always possible that they will do something other than what they described in their platform (perish the thought), but at this point that is just speculation.


It's not a baseless speculation. The proposal in the platform is at odds with their election campaign messaging.


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## andrewf (Mar 1, 2010)

I would not say it is contradictory. The 40 page platform document just includes a bit more nuanced explanation of the policy that is consistent with what they said in the soundbites.


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## GoldStone (Mar 6, 2011)

It's not contradictory if your definition of the middle class includes incomes up to 200K.


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## andrewf (Mar 1, 2010)

It would be contradictory if they said they were cutting taxes for the middle class and only the middle class.


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## gibor365 (Apr 1, 2011)

GoldStone said:


> It's not contradictory if your definition of the middle class includes incomes up to 200K.


There is no specific number where middle class becomes upper class  In one of the threads we discussed articles that show huge difference between middle class bracket in ON and NB....


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## Charlie (May 20, 2011)

upper/middle whatever. Top rate will now exceed 50% in most provinces. Ontario at 54%. New Brunswick at 59%. There' something just not right about paying more than half your marginal income in tax. Even for the wealthy.

Does Paul Martin have a son or daughter that Justin could appoint finance minister?


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## MrMatt (Dec 21, 2011)

Charlie said:


> upper/middle whatever. Top rate will now exceed 50% in most provinces. Ontario at 54%. New Brunswick at 59%. There' something just not right about paying more than half your marginal income in tax. Even for the wealthy.
> 
> Does Paul Martin have a son or daughter that Justin could appoint finance minister?


You forget that a popular opinion is that most rich people got there by taking the money from the poor, and wealth redistribution is "fair".
That's why massive wealth transfers from rich countries are such a big part of climate change, it's "solving" "two problems".


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## junkyardbottles (Apr 3, 2009)

Woz said:


> Student loans frozen and not accumulating interest until you earn $25,000. Currently, student loans are frozen for 6 months after you finish school, but interest still accrues.


The platform indicated that the "federal government" will pay the taxes on the student's behalf. If no-interest until you earn 25k, does that mean that if you never get a job after graduating, you can just not pay it back? (No interest, no job, and you die?) (Say someone gets married or something and becomes a stay at home parent? Or their net income always stays below 25k because they only work part-time?)


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## HaroldCrump (Jun 10, 2009)

We can't argue it both ways...many are going through excruciating pains to show how isolated the impact of new tax rates will be (i.e. only for income above $217K, or $250K, or whatever).
Vast majority of income earners will not be affected, or even might have lower taxes.
Great.

But that does not compute with their ambitious spending platform.

If tax hikes are isolated to a minority, where is the revenue for the massive spending program going to come from?

The so-called "modest" deficit cannot fill the revenue gap big as the Grand Canyon.
The highest deficit number I have seen thrown around is about $25B over 3 years.

That is supposed to pay for massive infrastructure spending, transit spending, tax breaks for the middle classes, increased services (Canada Post, etc.), all the social programs (refugees, etc.), lowering the OAS age to 65, etc.?

That is why I think we are looking at 3 scenarios (or some combination of these):
- Higher taxes in the future (incl. carbon tax, GST back up to 7%, etc.)
- Higher deficit
- Additional "sin" revenue (legalization of pot & prostitution)

Likely a combination of the above.

A 4th possibility is that oil has already bottomed and may start going back up again in 2016 and back above $100 in 2017.
That will significantly increase revenues...highly convenient for the in situ Trudeau govt.


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## agent99 (Sep 11, 2013)

junkyardbottles said:


> The platform indicated that the "federal government" will pay the taxes on the student's behalf. If no-interest until you earn 25k, does that mean that if you never get a job after graduating, you can just not pay it back? (No interest, no job, and you die?) (Say someone gets married or something and becomes a stay at home parent? Or their net income always stays below 25k because they only work part-time?)


It's been a very long time since I had a student loan. However I remember the terms. The loan only covered fees and was interest free for the number of years you had had the loan while a student. So for a 4 year degree, you could repay the loan interest free over 4 years post-graduation. After 4 years if not fully paid, interest charges kicked in. You did have to make payments. There were additional less friendly rules if you failed or dropped out. Seems like a better system than setting a dollar figure that will need frequent review.


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## agent99 (Sep 11, 2013)

atrp2biz said:


> So it looks like anyone making less than $217k per year will be getting a tax break. I would hardly call someone earning $217k to be middle class. I actually don't mind paying taxes (doesn't mean I'll pay more than I have to) and would rather have seen tax increases for the $89,401 to $1xx,xxx bracket. The Liberals are leaving a lot of revenue on the table with these cuts--not sure how everything is going to add up...wait a second, that's what it doesn't!


In the platform document, they say the changes in tax rates will be revenue neutral. Presumably THEY have done their math. Do you have better figures?


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## protomok (Jul 9, 2012)

Excellent work Woz! Very informative!

Can I suggest a couple updates?
~~~
-> #6 based on the Liberal plan the removal of the "first time" restriction on the HBP will only be in cases of "sudden and significant life changes...This will ease the burden on Canadians facing job relocation, the death of a spouse, marital breakdown, or a decision to accommodate an elderly family member" - link: https://www.liberal.ca/realchange/affordable-housing/

-> additional point - increase of Canada Student Grant for low-income students to $3000 (full time) and $1800 (part time) and increase income thresholds for eligibility (not sure what new thresholds will be?). Education and text book tax credits will be removed, tuition tax credit will be kept. link: https://www.liberal.ca/realchange/post-secondary-education/
~~~

I think some of the changes are great such as lower EI premiums, more flexible HBP, student loan changes. But I am concerned about the income tax increases to high income earners...given that the average Canadian doctor makes $307k and will now be paying up to 58.75% in income tax (plus CPP, EI, and all the other taxes) the net income gap between their American counterparts could make it really compelling to relocate to the US, I guess time will tell.


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## HaroldCrump (Jun 10, 2009)

agent99 said:


> In the platform document, they say the changes in tax rates will be revenue neutral


Aha, the famous "revenue neutral" gimmick.
The vision of Dalton McGuinty is clearly shining through, channeled via Gerald Butts & Kathleen Wynne.
Ontario is living proof that people will vote for anything as long as you promise that tax increases are "revenue neutral"...


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## Woz (Sep 5, 2013)

protomok said:


> Can I suggest a couple updates?
> ~~~
> -> #6 based on the Liberal plan the removal of the "first time" restriction on the HBP will only be in cases of "sudden and significant life changes...This will ease the burden on Canadians facing job relocation, the death of a spouse, marital breakdown, or a decision to accommodate an elderly family member" - link: https://www.liberal.ca/realchange/affordable-housing/
> 
> ...


Yup, added.


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## atrp2biz (Sep 22, 2010)

agent99 said:


> In the platform document, they say the changes in tax rates will be revenue neutral. Presumably THEY have done their math. Do you have better figures?


Their math has a number of assumptions which they have already recognized in their math. One key assumption is that high income earners cannot 'control' the 'income' they make--but many can. What do I mean by this? As an example, shareholders of CCPCs will simply ensure a salary draw below $200k and retain more earnings. I wouldn't think for a moment that high income earnings don't have smart accountants to optimize salary draws.

[Medical, dental, legal, engineering...] professionals that are not incorporated will now have a greater incentive to incorporate, especially with a reduction of the small business tax rate which is effective all the way up to $500k. This is where I see tax integration asymmetry.

There are other behaviour changes to reduce reportable income such as compensation through stock options.

In other words, you cannot do the math using assumptions from the status quo. The status quo does not remain the status quo when you make a structural change to any system.


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## Woz (Sep 5, 2013)

HaroldCrump said:


> Aha, the famous "revenue neutral" gimmick.
> The vision of Dalton McGuinty is clearly shining through, channeled via Gerald Butts & Kathleen Wynne.
> Ontario is living proof that people will vote for anything as long as you promise that tax increases are "revenue neutral"...


Is there a reason to doubt that the 1.5% tax cut will cost $2.87B per year and the 4% tax increase will cost $2.80B per year as they've costed? It seems like it'd be a fairly straight forward thing to calculate based on last years tax returns. I have heard some debate about whether the $600M cushion they added for the 4% tax increase was sufficient. Personally, $600M per year seems enough to account for any tax avoidance but it's difficult to know for sure.

Where I think the Liberals will have a hard time is with the $6.5B over 4 years in tax savings they're counting on through the "Harper spending review". That's a lot to come up with after a lot of cuts have already been made over the past 10 years.


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## andrewf (Mar 1, 2010)

agent99 said:


> In the platform document, they say the changes in tax rates will be revenue neutral. Presumably THEY have done their math. Do you have better figures?


Stephen Gordon did some checking, and the math seems to work.

http://worthwhile.typepad.com/worthwhile_canadian_initi/2015/10/lpc.html


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## andrewf (Mar 1, 2010)

protomok said:


> Excellent work Woz! Very informative!
> 
> Can I suggest a couple updates?
> ~~~
> ...


Big difference between average and marginal tax rates. Average tax rate on $300k per year is 40.46% in Ontario.


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## nobleea (Oct 11, 2013)

andrewf said:


> Big difference between average and marginal tax rates. Average tax rate on $300k per year is 40.46% in Ontario.


And what's the average tax rate going to be on 300K in the liberal world? 42.4%? It's not a significant change. They'll benefit from the lower marginal rate in the 44-80K range, which offsets some of the extra tax in the over 200K range.

CPP, EI and other taxes that are capped on a yearly basis are not dependent on income. Someone making 300K will pay the exact same as someone making 50K. They reach their cap earlier in the year, but that's all.


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## Charlie (May 20, 2011)

if it's revenue neutral I really don't see the point (other than electioneering posturing).

A max $670 reduction in tax to those making $90K doesn't seem worth the turmoil a 4% bump to the highest rate will create. 

Paul Martin's 29/26/15 was a good progressive spread.


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## gibor365 (Apr 1, 2011)

> That is why I think we are looking at 3 scenarios (or some combination of these):
> - Higher taxes in the future (incl. carbon tax, GST back up to 7%, etc.)
> - Higher deficit
> - Additional "sin" revenue (legalization of pot & prostitution)


As i mentioned earlier, I think we gonna have much higher deficit ... maybe 26B in 1 year (not 3) and it will last much longer that promissed 3 years (obviously Harper will be blamed for it )


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## Eclectic12 (Oct 20, 2010)

nobleea said:


> And what's the average tax rate going to be on 300K in the liberal world? 42.4%?
> 
> It's not a significant change. They'll benefit from the lower marginal rate in the 44-80K range, which offsets some of the extra tax in the over 200K range.


Conceptually ... yes it is not a significant change.

In practice, I question how many doctors are a good example of this income level. Based on the questions posted on CMF as well as most of the doctors I've visited recently having business cards along the lines of "Dr. X Services Limited Corp.", the days of a doctor being a regular income earner seem long past.


Cheers


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## HaroldCrump (Jun 10, 2009)

gibor said:


> it will last much longer that promissed 3 years (obviously Harper will be blamed for it


Liberals govt. in Ontario is still blaming Mike Harris...


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## gibor365 (Apr 1, 2011)

HaroldCrump said:


> Liberals govt. in Ontario is still blaming Mike Harris...


Obviously, who they gonna blame?! JT gonna say something like "Harper destroyed our infrastrucure and we should've invest more $$$ to improve it and blah blah blah" 

CCCP communist party was blaming last Tzar for 70 years


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## tenoclock (Jan 23, 2015)

Eclectic12 said:


> Conceptually ... yes it is not a significant change.
> 
> In practice, I question how many doctors are a good example of this income level. Based on the questions posted on CMF as well as most of the doctors I've visited recently having business cards along the lines of "Dr. X Services Limited Corp.", the days of a doctor being a regular income earner seem long past.
> 
> Cheers


Which is what Trudeau said he will clamp down now upon, on professionals and small business owners using the small business deduction to pay a low rate of taxes now and then withdrawing it later using their kids over 18 or during retirement years. It's similar (but not same) to having a $500K RRSP contribution limit each year for the wealthy.
This is a BIGGER issue, not the puny 4% increase on incomes over $200,000.


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## HaroldCrump (Jun 10, 2009)

gibor said:


> JT gonna say something like "Harper destroyed our infrastrucure and we should've invest more $$$ to improve it


Allow me to translate that for you - *transit unions have been getting only 8.50% raises *under Harper's austerity.
We should give them 15%...umm, I mean "invest in infrastructure"....


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## none (Jan 15, 2013)

Raises are pretty on par with inflation so basically they didn't receive a pay cut. I suggest you save your indignant rage for something a little more legitimate. 

"Workers gave the agreement their stamp of approval earlier this month and Aikins confirmed this week the deal includes increases of 1.8%, 1.8%, 2.3% and 2.3% respectively in each year of the agreement."


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## andrewf (Mar 1, 2010)

HaroldCrump said:


> Allow me to translate that for you - *transit unions have been getting only 8.50% raises *under Harper's austerity.
> We should give them 15%...umm, I mean "invest in infrastructure"....


Wages are not infrastructure and the vast majority of public transport workers are employed by provincial or municipal governments.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> Wages are not infrastructure and the vast majority of public transport workers are employed by provincial or municipal governments.


Most of public transit and infrastructure is provincial and municipal as well.
Here in S/ON, for instance, GO Transit is Metrolinx responsibility, which is a provincial corp.
TTC is Toronto responsibility, which is a municipality.
Water treatment plants, garbage disposal, recycling centers, etc. are all municipal responsibility.
and so on...

Any kind of infrastructure and public transit spending has to be implemented by pushing down the funds to the provinces and municipalities.
Federal infrastructure spending would be limited to ship-building, Parks Canada, and a few other areas.

But anything impacting day-to-day commute and accessibility for people is mostly provincial & municipal.


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## HaroldCrump (Jun 10, 2009)

none said:


> Raises are pretty on par with inflation so basically they didn't receive a pay cut. I suggest you save your indignant rage for something a little more legitimate.


No amount of public sector waste is enough for you.
*This is why stuff like this continues*.

I bet you agree with Hazel McCallion that *it is all water under the bridge*.


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## andrewf (Mar 1, 2010)

Feds have a role to play in that they have $$$$. Municipalities don't, and most provinces are strapped.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> Feds have a role to play in that they have $$$$. Municipalities don't, and most provinces are strapped.


Right, and once the $$ are in the buckets of provinces and municipalities, there is no accounting or auditing to say which $ is going towards the infrastructure hardware vs. which $ is going into compensation.
Feds will transfer fixed amount of funding to province > province will transfer to Metrolinx > Metrolinx then transfer to its various sub-agencies like GO Transit.
Beyond that point, there is no clear accounting.

The only check and balance is A/G audit and oversight, and we know what impact that has...


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## none (Jan 15, 2013)

HaroldCrump said:


> No amount of public sector waste is enough for you.
> *This is why stuff like this continues*.
> 
> I bet you agree with Hazel McCallion that *it is all water under the bridge*.


You just have a bad habit of taking things out of context and cherry picking examples. Sure lets compare government waste to general corporate corruption:
https://en.wikipedia.org/wiki/Enron_scandal

Also with the link you posted a 50% increase in the 'sunshine list' sounds bad in it's surface but with 'knife edge' lists as such you can have large people entering that without anything changing beyond raises with inflation. Anyway, it's rather self serving of you to complain about government employee excess when the private sector is much more at fault with the collapse of the middle class and general income disparity. Very few people in government actually get rich being in government. Government parking lots are filled up with more beaters than most others.

I do, however, think that no one in government should get paid more than 150K at the very maximum. I just don't see any reason for it. Also, tax rates of people making more than 200K should go back to more of the 'good ol days' levels in the 1950s


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## gibor365 (Apr 1, 2011)

> Allow me to translate that for you - transit unions have been getting only 8.50% raises under Harper's austerity.


 and even outstanding rating workers in big banks getting 2-4% increase in the best case (even though profits are going up), DCPP terms got much worse as well as ESP...
And our financial services IT company didn't give raises for last 3 years and cut some of the medical benefits


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## atrp2biz (Sep 22, 2010)

tenoclock said:


> Which is what Trudeau said he will clamp down now upon, on professionals and small business owners using the small business deduction to pay a low rate of taxes now and then withdrawing it later using their kids over 18 or during retirement years. It's similar (but not same) to having a $500K RRSP contribution limit each year for the wealthy.
> This is a BIGGER issue, not the puny 4% increase on incomes over $200,000.


How do you clamp down on something that is completely legal while maintaining the theory of integration? Altering professional corporations and small businesses would be political suicide.


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## HaroldCrump (Jun 10, 2009)

none said:


> Sure lets compare government waste to general corporate corruption


Speaking of cherry picking examples, note that you are using the example of a US corporation, which received no taxpayer funding, from 15 years ago, to try and justify govt. waste in Ontario at this time.

Also, corruption is not the same as waste.
The Metrolinx example is that of waste, not corruption (although the Metrolinx expense scandal is corruption, not waste - but that's a separate issue).

Thanks to Mike Harris' govt., at least we have some degree of transparency into this waste via the Sunshine List.
Sunshine List under-reports compensation, but at least we have _some_ visibility, and can apply a 30% markup to roughly calculate true compensation of public sector.



> Also with the link you posted a 50% increase in the 'sunshine list' sounds bad in it's surface but with 'knife edge' lists as such you can have large people entering that without anything changing beyond raises with inflation.


Article linked was about Metrolinx executive compensation, not the 50% increase in Sunshine List, although that is an issue as well.

That whole "inflation" argument is typical govt. union-speak because $100K is still nearly double average wages.
The Sunshine List is fine where it is, and if a change needs to be made, it should be revised downwards to about $55K or so, not upwards.



> Very few people in government actually get rich being in government


Define rich - govt. employees are amongst top income earners, not including accrued pension benefits.
*Average federal govt. salaries are $114K as per PBO report* - placing them within the top 10% of income earners in the country.



> Government parking lots are filled up with more beaters than most others


Ah, and you are the authority on that?
Perhaps we need a new metric to measure compensation and inflation - the Beater Index.



> I do, however, think that no one in government should get paid more than 150K at the very maximum


So you are basically laying off nearly 1/4th of all govt. workers that fall into that category.
Many teachers, cops, TTC drivers, IT workers, etc. easily fall into that category.


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## tenoclock (Jan 23, 2015)

atrp2biz said:


> How do you clamp down on something that is completely legal while maintaining the theory of integration? Altering professional corporations and small businesses would be political suicide.


By making it illegal?

I just told you a loophole that a lot of small business corps defer taxation by paying the low rate for a few years as opposed to high that they should be taxed, and then withdraw money via dividends to kids once they turn 18 almost tax free for a few years until kids start working at 23-24. Even the US has closed this loophole by introducing a kiddie tax for dependent children attending post secondary institutions. 

Another one is to defer taxation until retirement and withdraw money in small chunks like an RRSP so as to optimize the use of tax brackets. This is basically having a supersized RRSP limit every year and taking advantage of that. 

Another is income splitting with spouses, via dividends or salary. Not to mention generous expense deductions, which while in theory only allows business expenses, but in reality people deduct all types of expenses that they believe can fly by CRA, especially with respect to auto, meals and entertainment, travel and supplies.

And while no government can effectively legislate against fradulent expense deductions, they sure can introduce new rules which limit small corps ability to become tax deferral instruments and adult children tax avoidance vehicles. 

Governments have always played with the rules in the past, and there is no reason to believe they won't continue doing so.


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## gibor365 (Apr 1, 2011)

> Thanks to Mike Harris' govt.


 To tell the truth, I'd like to see Mike Harris in the office again


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## atrp2biz (Sep 22, 2010)

tenoclock said:


> By making it illegal?


The government that does this will be out of power for a long, long time.


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## Woz (Sep 5, 2013)

I thought they already closed most of those loopholes with regards to investment income in a small business. Investment income in a small business is taxed at the highest rate so it doesn’t let you defer taxation. Dividends paid to a child under 18 is taxed at the highest rate so you can’t really income split with a minor. 

The only thing you can do with investment income in a small business is income spilt with a spouse or a child over 18, but with a child over 18 you’re allowed to do that anyways outside of a small business.


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## gibor365 (Apr 1, 2011)

> but with a child over 18 you’re allowed to do that anyways outside of a small business.


 unfortunately not anymore


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## Woz (Sep 5, 2013)

gibor said:


> unfortunately not anymore


Do you have any more info about that? Income tax act still only lists attribution for spouses and minors under 18.
http://laws-lois.justice.gc.ca/eng/acts/I-3.3/page-100.html#docCont


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## tenoclock (Jan 23, 2015)

Woz said:


> I thought they already closed most of those loopholes with regards to investment income in a small business. Investment income in a small business is taxed at the highest rate so it doesn’t let you defer taxation. Dividends paid to a child under 18 is taxed at the highest rate so you can’t really income split with a minor.
> 
> The only thing you can do with investment income in a small business is income spilt with a spouse or a child over 18, but with a child over 18 you’re allowed to do that anyways outside of a small business.


1) I am not talking about dividends to children under 18, I am talking about dividends to children once they turn 18. Most children especially of professionals and wealthy business owners are still dependent on parents regardless and they also are very likely to continue studying. Their income is zero for the most part of the age group 18-24. That is the time when you can easily milk out close to quarter a million dollars of dividends per child without paying any or very little taxes. This is an extremely effective strategy, ask any accountant worth his profession. 

2) Yes investment income is taxed at the highest rate but we are not talking about investment hold co, we are talking about active business income. A professional who incorporates is paying the low rate of tax at 15.5% rather than being taxed at 49.5% personally. The remaining portion is deferred or income split with spouse (something you cannot do that easily if reporting income personally). Once the professional retires, he or she can easily take the money out in chunks over the retirement years so as to never go into a higher tax bracket, very much like an over sized RRSP. Combined with option 1, people can cut their average tax rate significantly, sometimes more than half.


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## gibor365 (Apr 1, 2011)

Woz said:


> Do you have any more info about that? Income tax act still only lists attribution for spouses and minors under 18.
> http://laws-lois.justice.gc.ca/eng/acts/I-3.3/page-100.html#docCont


Trudeau Jr promised to cancel income split for everybody except seniors


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## atrp2biz (Sep 22, 2010)

tenoclock--I agree that the tax deferral you describe is done. My wife and I do this with our corps. My point is that no government will make a change to this. The doctors, lawyers and small business owners will have a very long memory for a government that punishes any practice of retaining earnings. It also incents sub-optimal allocation of capital--a small business (or any business for that matter) would be punished to retain earnings (or improve balance sheet in general) for acquisitions or long-term capital spending.


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## Charlie (May 20, 2011)

JTs been branding himself as small business friendly. Even pledging to reduce the already low active bus tax rate. So it's tough the fathom he'd make such drastic changes to how small businesses are taxed.

I suppose he could bump the kiddy tax (tax on dividends to minor kids) to 25yo? But taxing small business retained earnings before they're distributed would be truly odd.


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## andrewf (Mar 1, 2010)

What is the real problem there? Eventually, if someone wants to consume that wealth, they need to take it as either a dividend or salary and it is then taxed. Loopholes like preferred share classes for children & spouses seems like something that could be tightened up without too many adverse impacts.


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## tenoclock (Jan 23, 2015)

atrp2biz said:


> tenoclock--I agree that the tax deferral you describe is done. My wife and I do this with our corps. My point is that no government will make a change to this. The doctors, lawyers and small business owners will have a very long memory for a government that punishes any practice of retaining earnings. It also incents sub-optimal allocation of capital--a small business (or any business for that matter) would be punished to retain earnings (or improve balance sheet in general) for acquisitions or long-term capital spending.



Most people who use this tax strategy have no intention of actually growing their business and hiring more employees. It's just another tax avoidance strategy to pay less tax. I am in the business and work with hundreds of small businesses, none have any growth plans and most incorporate for the obvious splitting and deferral benefits. I am NOT in favor of higher taxes on businesses, I am merely pointing out that while employees who earn big pay almost 50% marginal rate, incorporated self employed people would probably pay less than half that rate while making same or more money. So it's not exactly a very progressive tax system. Also keep in mind that the employees in the highest bracket are usually employed by large corporations who themselves pay high rates of tax.

Canada is already very favorable to small businesses, even more so than the US. Trudeau has already openly acknowledged this problem and while he has not proposed any counter measures to fix this leak, there is a high possibility that he could do so in the future.

In my opinion, tax rates for larger corporations should be reduced rather than pandering to smaller businesses.


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## GoldStone (Mar 6, 2011)

tenoclock said:


> Trudeau has already openly acknowledged this problem and while he has not proposed any counter measures to fix this leak, there is a high possibility that he could do so in the future.


I will believe it when I see it.

I am sure that many (most?) people in his close political circle are incorporated. Political consultants, economic consultants, PR consultants, lawyers, speech writers, you name it. He himself used a corp to shelter his hefty speaking fees.

What are the chances they will close the loopholes that benefit them directly? Slim to none if you ask me.


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## andrewf (Mar 1, 2010)

Are they paying half the tax once it is distributed to the individual to actually spend? Because the tax rate of ineligible dividends ramps up pretty quickly as well, and integration should lead to similar after tax income. Now, tax can be deferred (and invested passively in the CCPC) but it is taxed rather unfavourably unless the investment income is distributed to the shareholder.

Am I missing something?


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## tenoclock (Jan 23, 2015)

You are missing the flexibility of distributing that income to different shareholders (i.e. non earning kids over 18), to utilize lower tax brackets at different points in time, and also after retirement. Pay kids 50K of dividends tax free. When you actually tally the amount of total taxes paid to income earned and withdrawn, it's not even close to the average rate that employees would pay. Of course each situation varies but that's why accountants come in handy to reduce your tax bill. 

Ask yourself this, if integration eliminated any benefit of incorporating, why would people do so (apart from getting limited liability -and this does not even apply to professional corps) and incur extra costs and paperwork?


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## atrp2biz (Sep 22, 2010)

It goes back to my original question to you--how do you fix it. You replied "by making it illegal". Make what illegal? Restricting shareholders of CCPCs? How would one do that? What legal precedent could possibly restrict shareholders and distribution of capital among shareholders?

Could you imagine if any party out there promoted lower large corporate tax rates while increase the small business tax rate. Like I said above, these kinds of policies would be political suicide.



tenoclock said:


> Pay kids 50K of dividends tax free.


This applies to eligible dividends. If we're talking about small businesses, those dividends would typically be ineligible. If they are eligible, they have already been taxed at the higher corporate rate.

All-in-all, I don't disagree with you that CCPCs are used as a way to defer taxes. But you can't disincent retained earnings without impacting capital planning/spending for businesses that do retain earnings for this purpose.


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## tenoclock (Jan 23, 2015)

You said these are all legal ways - I simply replied it can always be made illegal or loopholes could be closed like trusts were shut out few years ago. 
kiddie tax, reduction of small business deduction, or implementing more rules to tighten the definition, etc etc

I am also talking about ineligible dividends - you can use calculator on CRA website to easily check this you are basically only paying OHIP in Ontario for upto 30K and 5% uptil 45K and 20% after 50K until integration takes full hold.


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## andrewf (Mar 1, 2010)

tenoclock said:


> You are missing the flexibility of distributing that income to different shareholders (i.e. non earning kids over 18), to utilize lower tax brackets at different points in time, and also after retirement. Pay kids 50K of dividends tax free. When you actually tally the amount of total taxes paid to income earned and withdrawn, it's not even close to the average rate that employees would pay. Of course each situation varies but that's why accountants come in handy to reduce your tax bill.
> 
> Ask yourself this, if integration eliminated any benefit of incorporating, why would people do so (apart from getting limited liability -and this does not even apply to professional corps) and incur extra costs and paperwork?


It's not tax-free, the small business tax rate still applies. But closing the loopholes on granting non-arms length people share classes ("dividend sprinkling") for non-market prices seems like something that would not be too difficult to go after.


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## atrp2biz (Sep 22, 2010)

tenoclock said:


> You said these are all legal ways - I simply replied it can always be made illegal or loopholes could be closed like trusts were shut out few years ago.
> kiddie tax, reduction of small business deduction, or implementing more rules to tighten the definition, etc etc
> 
> I am also talking about ineligible dividends - you can use calculator on CRA website to easily check this you are basically *only paying OHIP in Ontario for upto 30K and 5% uptil 45K and 20% after 50K* until integration takes full hold.


So...not really tax free, right?


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## andrewf (Mar 1, 2010)

Here's what I'm thinking. You can allow other share classes to be sold to non-arms length individuals of the primary owner(s) of the CCPC, but at a defined coupon rate and tax the value of those shares using some prevailing coupon rate in the market. So, if you want to grant your adult kids shares that would enable you to distribute to them $10k in dividends per year, and the 'reference coupon rate' for such a share is 10%, in the year the shares are given to the kids they are subject to a capital gain of $100k of implied value of those shares less whatever they paid for them (possibly $0).

This seems like it would not be a totally unreasonable (or illegal) way to curtail this tax avoidance strategy.


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## atrp2biz (Sep 22, 2010)

andrewf said:


> But closing the loopholes on granting non-arms length people share classes ("dividend sprinkling") for non-market prices seems like something that would not be too difficult to go after.


If shares were acquired at FMV, this would be constitutionally difficult to restrict.


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## andrewf (Mar 1, 2010)

^Agreed, but I think the government has a say in determining FMV when the parties are not arms-length.


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## atrp2biz (Sep 22, 2010)

Absolutely. There has to be proper and transparent consideration for the shares.


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## tenoclock (Jan 23, 2015)

atrp2biz said:


> So...not really tax free, right?


Are you arguing semantics now? By that argument, nothing is tax free and a lot of things are double taxed. 

I just showed you how incorporated small business owners can get away by paying 15-20% tax while making income at a level where employees are paying an average nearing 50% tax. This is not a progressive tax system no matter what the claim. 


Small business owners have it real good in Canada - I just doubt that it would be political sucide for anyone closing these loopholes. JT has promised massive expenditures. Milking the executives and employed professionals is not going to bring dough in, so watch out small business owners.


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## nobleea (Oct 11, 2013)

Sorry to dredge up an old thread, and perhaps the answer is in here already.
On the revamped child tax benefit, it will be based on household income. I believe it becomes fully clawed back at 200K household income.

What income? gross, taxable, etc? After RRSP deductions and others, or before?


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## GoldStone (Mar 6, 2011)

nobleea said:


> Sorry to dredge up an old thread, and perhaps the answer is in here already.
> On the revamped child tax benefit, it will be based on household income. I believe it becomes fully clawed back at 200K household income.
> 
> What income? gross, taxable, etc? After RRSP deductions and others, or before?


Too early to tell. The new program isn't out yet.


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## Woz (Sep 5, 2013)

Yeah, too early to say for sure, but most likely it'd be like the current system. Based on net income on your tax return (line 236: taxable income from all sources minus deductions such as RRSP).

Also, they announced today it'll be tabled in the 2016 budget and first cheque will be in July.


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## nobleea (Oct 11, 2013)

So one can expect the Harper taxable cheques to stop in Jan, and then these new cheques to show up in July which would be based on your family net income from 2015.


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## GoldStone (Mar 6, 2011)

nobleea said:


> So one can expect the Harper taxable cheques to stop in Jan


I don't think so. Today's Ways and Means Motion didn't touch them. I expect the cheques will continue until the new program comes into effect.


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## HaroldCrump (Jun 10, 2009)

As per the LPC website, the means testing for the new Canada Child Benefit program will be based on household income.
That said, the bill has not been presented to Parliament yet, so I guess anything can happen.


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