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Already in the middle class? Trudeau’s reforms look great

But if you’re struggling to join it? Not nearly as appealing


 
Prime Minister Justin Trudeau arrives at an end-of-session news conference on Parliament Hill in Ottawa on Wednesday, June 22, 2016. (Adrian Wyld/CP)

Prime Minister Justin Trudeau arrives at an end-of-session news conference on Parliament Hill in Ottawa on Wednesday, June 22, 2016. (Adrian Wyld/CP)

Justin Trudeau isn’t shy about using the same word clusters over and over, and among his favourites is the one about offering “real help to Canada’s middle class and all those working hard to join it.” So far, it seems the first part carries more weight than the second.

The Prime Minister emphasizes how his government has already made good on that pledge three times: first a tax cut, then a new child benefit, and finally the Canada Pension Plan reform that’s slated to be finalized by Ottawa and the provinces this week. But a close look at where the money flows on all three policies shows that Canadians who are already in the middle class stand to gain far more than those struggling to catch up with them.

I’ve turned more than once to David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, to sort out the numbers on these files. Late last year, Macdonald’s analysis, based on a gold-standard Statistics Canada model, showed who benefits most from the Trudeau government’s trim of federal tax rate on income between $44,700 and $89,401 a year, from the current 22 per cent to 20.5 per cent.

The biggest savings naturally go to two-income households where each earner brings in close to the maximum amount of income subject to the cut. The upshot: the roughly 1.6 million families making about $48,000 to $62,000 will see their tax bills trimmed by, on average, just $51, while those making $62,000 to $78,000 will save $117. Moving up the prosperity ladder, families in the $124,000 to $166,000 range pay $521 less in taxes, those making $166,000 to $211,000 see their tax bill lightened by $813.

The Canada Child Benefit (CCB) is a smart streamlining of the system that replaces a confusing array of existing payments to families with kids. Ottawa will start sending monthly, tax-free CCB cheques to parents later this month. Macdonald crunched those numbers, too. For families with children scraping by on less than about $40,000, the CCB will increase their support from the federal government by just over $1,000 a year. For families with kids making anywhere from $40,000 to $71,000, the CCB is worth about $2,600 more on average.

For families making above $71,000, there’s still a net gain under the CCB, though it declines as income grows, shrinking to nothing when income crests above about $190,000. Still, for families earning $122,000 to $148,000, the average hike in child benefits is a bit more than $1,200 a year—a notch more than the boost those households raising kids on less than $40,000 will reap.

That leaves the Canada Pension Plan reform as the last element on which to sort out the split between the middle-income earners and those who aspire to join their ranks. Under the deal struck between Ottawa and most provinces, CPP premiums will rise between 2019 and 2023, but so will the amount of income covered, climbing to $82,700, up from $54,900. The result is bigger benefits, especially for retirees who earned pretty decent salaries during their working years.

The maximum annual CPP benefit payout for a long-term employee who made a good salary will rise to $19,900, after the reforms are completely implemented, up from about $13,110 now. But the snapshot examples provided by the federal Finance department give a better impression of the real impact. Let’s compare two workers, both 41 now, so they will be 50 when the CPP changes come into full effect in 2025, one making $50,000 and the other $75,000. The $50,000 earner stands to gain $1,500 in CPP benefits in retirement, while the $75,000 earner is in line for a $2,600 CPP benefit increase.

The impact is greater for Millennials only just getting started on careers now. For those who will turn 30 in 2025, if they managed to earn $75,000 a year, the new CPP will ultimately pay them $6,100 more a year on retirement than they would have received under the old plan. Those who steadily make $50,000 during their working lives will gain a lot less, $3,600 in added CPP on retirement. A worker who pulled in just $25,000 a year over 35 years of contributing to CPP would gain just $1,800 a year in benefits.

Of course, the tax cut, the child benefit and the pension expansion aren’t the only reforms the Trudeau government will make. Other moves might help those further down the income scale, like the boost in the Guaranteed Income Supplement for seniors in last spring’s budget. But looking just at these three major moves—the thrusts Trudeau urged Canadians to focus on as he wrapped up his first parliamentary session—the way the new money flows is consistent. Far more of it goes those already in the middle class that those striving to join it.


 

Already in the middle class? Trudeau’s reforms look great

  1. This was a move by Trudeau that blew Harper and the cons out of the game, and they(cons) didn’t see it coming, nor did the dippers. Another thing Trudeau has done since he was elected, shut down talk of abolishing the senate, instead of berating the senate everyday and brow beating its members, he has enhanced it, and turned it into what it is supposed to do, work for the people. Finally we have a PM that talks to the people of this country, and not at them.

    • What the ef are you smoking, This nitwit, self indulged Laurentian elite has done nothing but give billions of $s away to third world countries, the U.N., who by the way will be running this county if PM Buttercup has anything to say about it, and any other banana republic that’s hold it hand out. He’s broken every promise made during the election, our citizen are being held hostage by Iran, another county that this S##t for brains PM want to get into bed with, all the while bending over to the whims of Barack, I wouldn’t say Muslim terrorist if one was trying to cut my head off, Obama. Wake up Canada before it too late.

      • Carpet Bomber is the worst partisan that I have ever come across. Every post drips of unwarranted praise for Trudeau that is completely devoid of reality.

        CB: just fellate the guy and get it over with already. At least that could be done privately rather than on the Maclean’s comment section. Embarrassing.

        • I’m afraid he’d have to get in line behind the CBC, Toronto, and just about every Canadian Journalist.

          They sing Trudeau’s praises because of what his father accomplished, not what he’s accomplished.

          this will go on for a while.

          • If anyone else in the running for Prime Minister ended up with the reins, this wouldn’t be much of an issue. Those guys had rock-solid track records. “Zoolander,” as he is so often called on other boards, simply announced and no one else stood a chance.

            Also, he was a greenhorn with a nice smile and absolutely zero record to attack, the one combination that could defeat the Harper Conservatives. Wait until his worshipers go out into the real world in the next campaign and the one after.

    • Did you read the article that John Geddes wrote before you rushed in and praised Trudeau for his brilliance in ripping off low income Canadians and in “listening to the Senate?” He didn’t listen to the Senatel, not even the non partisan senators he just appointed. They asked for changes in the physician assisted suicide bill to include people in pain and a provision for people to make arrangements ahead of time should they become demented and he refused to budge on their recommendations. We know you love him but try to offer some honest appraisals of his performance and if you can’t bring yourself to be critical, then say nothing.

  2. If the folks struggling to join the “middle class” find it hard now…..just wait until the Libs raise the GST and increase taxes in order to save the planet from Global warming.

    Ha!!

  3. The way I see it, every dollar that Trudeau has given away to foreign nations, every grant to a special interest and every unnecessary dollar of interest on our mounting debt is money that could have instead been used to help Canada’s most vulnerable.

    Compassion is not handing out money like a drunken sailor to boost your popularity. Compassion is having the courage to no to some, so that we can focus on help those truly in need. Yes Canada is a prosperous country but we have high rates of child poverty, impoverished seniors, a failing heath care system and a housing crisis.

    Yes talk of the middle class is great to help get elected. But I get no sense of confidence that Trudeau’s priorities are geared towards helping those than need it most.

  4. Excellent article John. Keep it up.

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