By proposing a middle-class tax cut and a new child benefit, Liberal Leader Justin Trudeau today filled in some of the major gaps in what we knew about how this fall’s federal election will be fought, when it comes to economic policy.
Don’t miss Kevin Milligan’s clear analysis of today’s Liberal policy proposals. (The University of British Columbia economist and Maclean’s blogger is on Trudeau’s economic advisory council, so he had a jump on the story, much to the benefit of any reader seriously curious about this policy.)
What Trudeau has put on the table is, first, a pledge to cut the tax rate on income from $44,700 to $89,401, giving middle-income earners about $3 billion in tax relief. He’d pay for it by hiking the rate on Canadians making more than $200,000.
His second proposal, something called the Canada Child Benefit, is more complicated. The CCB would roll together some $18 billion a year of existing federal child benefits and add another $4 billion. The upshot varies for different sorts of families. But, for instance, Liberals say a typical two-parent family with two kids would get $490 a month, tax-free, under their plan, compared to $275 a month, after taxes, under the Conservatives.
At the same time, Trudeau would eliminate Prime Minister Stephen Harper’s signature $2-billion “Family Tax Cut” income-splitting measure, which allows couples with kids to save on their taxes by transferring income from the higher-earning to the lower-earning spouse. (That leaves the Liberals with $2 billion of their $4 billion in added CCB benefits to find someplace else.)
Here are three key questions to ask about what Trudeau is pitching:
Is it fairer? The $2-billion income-splitting program Trudeau vows to scrap distributes benefits to just under two million of the roughly four million Canadian families with kids, mostly to middle-class households—but only to those with two parents. The new Liberal CCB would boost benefits to all families with kids, except a few hundred thousand making more than $150,000. So this is bound to feel fairer to, in particular, single-parent households. As for the income-tax cut, it glaringly won’t help anyone making less than $44,700. When asked about this, Trudeau basically replied: Stay tuned.
Is it simpler? Anyone trying to gain a quick understanding of the CCB is apt to find it frustrating. That’s not Trudeau’s fault, though. The fact is, the new benefit combines and replaces a raft of existing ones, including some the Liberals like (for example, the Canada Child Tax Benefit and the national Child Benefit Supplement) and some they don’t (notably, the Conservatives’ beloved Universal Child Care Benefit, source of the familiar monthly cheques to parents). Overall, the Trudeau plan would certainly simplify the system. As for the middle-class tax cut and new top tax bracket, these are pretty straightforward changes.
Is it justified? Trudeau says the reforms are needed because middle-class Canadians “feel like no one is on their side.” We’ve been hosting lively debate at Maclean’s about the true state of Canadians earning around the median for years now (here’s a taste from the archives). Informed opinion varies. But the chart below shows something basic: median incomes rising during the Harper era for various types of households. Trudeau needs to show why these figures don’t reflect the real experience of middle-class Canadians. And Harper, of course, has to persuade them that, as these numbers might suggest, they’re doing fine.
|Couples, with or without children||$70,400||$73,420||$75.880||$75,320||$76,950||$79,530||$81,980|