Trudeau’s election plan: Tax the rich to feed the middle class
The first plank of the Liberal's plan boosts income tax by 4 per cent on those earning $200k or more per year
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OTTAWA—Justin Trudeau is attempting to steal electoral ground from the left and the right with an economic agenda that promises to take more from the rich to give to the middle class.
The Liberal leader unveiled his alternative to the Harper government’s economic plan: hike taxes on the wealthiest one per cent to pay for more generous child benefits and an across-the-board income tax cut for middle-income earners.
His promise to impose a new 33 per cent tax rate on Canadians who earn more than $200,000 per year took aim at the NDP, which has traditionally championed efforts to reduce income inequality.
At the same time, his pledge to provide broad-based tax relief and enriched child benefits for middle-income earners attempts to mow what has traditionally been Conservative turf.
The proposals will form a central pillar of the eventual Liberal platform for the federal election in the fall. But Conservatives cast Trudeau’s plan as a tax hike in disguise. New Democrats argued that Liberals created the income gap between rich and poor and can’t now be trusted to narrow it.
Under Trudeau’s proposals:
- 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.
- Prime Minister Stephen Harper’s newly enriched universal child care benefit would be scrapped and two other existing child benefits would be rolled into a single, more generous, monthly, tax-free “Canada child benefit.”
“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 Harper’s.
The announcement was 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.
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 replace 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.
“Families like mine that get thousands of dollars from Mr. Harper’s child benefit system shouldn’t,” Trudeau said.
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 scrap that and 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, more generous 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.
Trudeau has promised that the eventual Liberal platform will be fully costed and designed within the framework of a balanced federal budget.
A tax cut of $3 billion a year for the middle class would be counterbalanced by an additional $3 billion in taxes on the wealthy, the Liberals said.
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.
Trudeau indicated the remainder could be paid for by cutting things like government advertising and consultants. But he also said there are more promises to come on education, child care and the working poor which will have to accounted for.
Employment Minister Pierre Poilievre cast the entire announcement as “the Trudeau tax.”
“The Liberals … would replace the family tax cut with a Liberal family tax hike,” Poilievre said.
Liberal calculations showing most families would get more under Trudeau’s plan than they get currently don’t take into account the benefits of income splitting, which Trudeau would cancel, Poilievre argued.
Nor do they take into account his vow to reverse the doubling of TFSAs, which Poilievre contended would amount to a tax hike on those earning less than $60,000 a year.
NDP Leader Tom Mulcair, who has ruled out increasing personal income taxes for anyone, including the wealthy, blamed income inequality on past Liberal governments which slashed the corporate tax rate.
“The only Canadians not paying their fair share are the large Canadian corporations,” he said, reiterating that only the NDP would hike corporate taxes.