Not help­ing the mid­dle class

81 per cent of mid­dle-class fam­i­lies pay­ing more in taxes GUEST COL­UMN

Lethbridge Herald - - READER'S FORUM - Charles Lam­mam

A se­man­tic sleight of hand can’t hide the dam­age fed­eral tax pol­icy changes have had on Canada’s mid­dle class.

In a re­cent com­men­tary in the Fi­nan­cial Post, Si­mon Fraser Univer­sity pro­fes­sor Rhys Kes­sel­man crit­i­cized the Fraser In­sti­tute’s analysis of how fed­eral tax pol­icy changes have in­creased the amount of in­come tax paid by mid­dle­class fam­i­lies. Kes­sel­man doesn’t con­test, re­fute or dis­prove our tax analysis. Rather — in par­rot­ing the Lib­eral gov­ern­ment’s talk­ing points — he con­flates taxes and trans­fers, and com­pletely misses the point of our analysis.

On the cam­paign trail and since com­ing to power, Prime Min­is­ter Justin Trudeau, Fi­nance Min­is­ter Bill Morneau and other fed­eral of­fi­cials have re­peat­edly claimed that the gov­ern­ment cut in­come taxes on mid­dle-class fam­i­lies. For ex­am­ple, the Lib­eral gov­ern­ment’s first bud­get de­clared “the gov­ern­ment cut taxes for mid­dle-class Cana­di­ans ev­ery­where.”

As part of an or­ga­ni­za­tion fo­cused on mea­sur­ing the ef­fects of gov­ern­ment pol­icy, my Fraser In­sti­tute col­leagues and I set out to test this claim to see if the gov­ern­ment had in fact low­ered in­come taxes on mid­dle-class fam­i­lies. We found this wasn’t the case for the vast ma­jor­ity.

While the gov­ern­ment did re­duce the sec­ond-low­est per­sonal in­come tax rate (from 22 per cent to 20.5 per cent), it also elim­i­nated a num­ber of tax cred­its (pro­vi­sions in the tax code that re­duce a qual­i­fy­ing per­son’s in­come taxes), thereby in­creas­ing in­come taxes for Cana­di­ans who pre­vi­ously claimed such cred­its. The gov­ern­ment elim­i­nated the in­come-split­ting tax credit for cou­ples with young chil­dren, the chil­dren’s fit­ness tax credit, the pub­lic tran­sit tax credit, the ed­u­ca­tion tax credit and the text­book tax credit.

When all the Trudeau gov­ern­ment’s changes are con­sid­ered, 81 per cent of mid­dle-class fam­i­lies now pay more in per­sonal in­come taxes.

When con­fronted with our find­ings, the gov­ern­ment didn’t dis­pute them. In­stead, it tried to dis­miss them by say­ing the analysis didn’t ac­count for the en­hance­ment to the Canada Child Ben­e­fit, a gov­ern­ment trans­fer pro­gram.

And now Kes­sel­man is par­rot­ing the gov­ern­ment’s re­sponse.

Kes­sel­man, who holds the Canada Re­search Chair in pub­lic fi­nance at Si­mon Fraser Univer­sity’s School of Pub­lic Pol­icy, should know bet­ter. Taxes and trans­fers aren’t the same thing. Cut­ting taxes leaves Cana­di­ans with more of their own money. In­creas­ing trans­fers gives Cana­di­ans more of other peo­ple’s money. There’s a sig­nif­i­cant dif­fer­ence.

And more im­por­tantly, we fo­cused on taxes be­cause the gov­ern­ment’s re­peated claim was that it cut in­come taxes on the mid­dle class. By now in­vok­ing in­creased trans­fers, the gov­ern­ment and Kes­sel­man im­plic­itly ac­knowl­edge the va­lid­ity of our re­sults.

All of this em­pha­sizes the im­por­tance of our analysis, which brought key ev­i­dence to bear on what was a corner­stone com­mit­ment of this gov­ern­ment to cut in­come taxes on the mid­dle class. And this ev­i­dence has helped Cana­di­ans un­der­stand the real­ity of Ot­tawa’s tax changes, which run con­trary to the gov­ern­ment’s rhetoric.

The gov­ern­ment has now changed its mes­sag­ing on this is­sue. Yet Kes­sel­man tried to dis­miss our study with the same er­ro­neous crit­i­cism. That does a dis­ser­vice to Cana­di­ans.

Charles Lam­mam is di­rec­tor of fis­cal stud­ies and co-au­thor of the Fraser In­sti­tute study Mea­sur­ing the Im­pact of Fed­eral Per­sonal In­come Tax Changes on Mid­dle In­come Cana­dian Fam­i­lies, avail­able at www.fraserin­sti­tute.org. Dis­trib­uted by Troy Me­dia.

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