After a short throne speech to kick off the Liberal government’s first session of parliament, Prime Minister Justin Trudeau’s first order of business will be to introduce tax cuts for the middle class.
Those earning between about $45,000 and $89,000 will see a savings of up to $670 per year under the new plan.
“We are going to make cuts to the middle class that'll make a material difference in their standard of living,” Finance Minister Bill Morneau said Friday.
The tax cut will cost around three billion dollars, a sum the Liberals say they’ll make back by upping taxes on those earning more than $200,000 per year. It’s an attractive prospect for a lot of people, said tax expert Fred O’Riordan.
“These tax measures have a strong political appeal obviously,” O’Riodran said. “Do the math -- there are many more middle-income Canadians.”
But, while the numbers might add up on paper, some tax experts don’t think the scale will stay balanced in the real world.
Jeremy Kronick from the C.D. Howe Institute said he doesn’t expect the tax break to be revenue-neutral.
“What we find is that, in general, the wealthy tend to adjust their behaviour, their taxable income.”
Kronick said those who can afford to do so might begin working less often, since the financial incentive to earn more income will be reduced after a certain point. He also said those top earners might move to a different province or even outside the country – an assessment tax lawyer Vern Krishna agrees with.
“Raising the tax on a very enterprising group, the top one per cent, has very unfortunate consequences,” Krishna said.
He said raising their tax rates past 50 per cent could cause some to migrate.
“Which is always unfortunate because these are highly qualified professional people whom we want to keep,” Krishna said.
The opposition says cuts or higher deficits are inevitable if these tax breaks fail to break even.
The finance minister said he will update the cost of the cuts and the revenue from the hikes next week, when the tax changes are introduced.
With files from CTV's Omar Sachedina