Middle class tax burden grows under Liberals, report says

Changes said to have reverse effect

Middle-class families in Canada are paying higher income taxes compared to a few years ago, despite claims by the federal government that it has eased the tax burden on this income group, says a new report.

In a report Tuesday, Vancouverbased think-tank The Fraser Institute said 60 per cent of the 3.88 million families included in its study are paying higher income taxes under the current government. Of those included in the middle-income bracket, 81 per cent are paying higher total income taxes after the changes, an average of $840 more per year.

The report comes amid a furor in Ottawa over a recent Liberal proposal to alter tax rules for Canadian private corporations and businesses. The opposition Conservatives have been seizing on the disquiet from some business owners and professional associations, framing the tax proposals as an attack on the middle class.

The proposed changes would effectively do three things: limit income-splitting within corporations, raise taxes on some portion of internal passive investments and place new restrictions around capital gains exemptions. Farmers, doctors and other groups have been highly critical of the changes, saying they will deter investments that place undue tax burden on them.

Consultations on the recent proposals will conclude early next month. The Fraser report did not account for those recent proposals, and instead focused on earlier tax changes that have already been implemented.

The federal government has taken steps in recent years to add to the tax burden on high-wealth individuals while scaling back taxes on the middle class.

But those changes have come alongside the removal of various tax credits and the Harper-era income-splitting policy, which have on the whole raised income taxes on the middle-class, the Fraser report says. The federal government has so far scrapped public transit credits, children’s fitness credits, and education and textbook credits.

“The government in its communications is not talking about these tax credits, it is only talking about the rate reduction. And that’s why they’re wrong in their assessment,” said Charles Lammam, the Fraser researcher who wrote the report.

Lammam’s report analyzed income taxes for 3.88 million Canadian couples with at least one child. Eighty-one per cent of those earning in the middle income bracket, between $77,000 and $107,000 annually are paying higher income taxes after the recent changes. Of the second-lowest quintile, earning between roughly $51,000 and $77,000, 69 per cent are paying higher overall income taxes. The highest quintile, earning over $150,000, saw just 51 per cent pay higher income taxes.

He says current proposals on private corporations and businesses are likely to raise the overall income taxes of many of the same middleincome earners.