New report calls Liberals’ 2016 tax hike ‘revenue loser on a national scale’
The Liberal government’s 2016 tax hike on Canada’s top one per cent not only failed to yield the promised billions, but resulted in a net revenue loss for government coffers, according to a new report
released by the C.D. Howe Institute.
After adjusting for economic changes and one-time factors, the paper estimates that the Liberals’ new tax bracket for top earners creates $1.2 billion in new revenue for the federal government but a $1.3 billion loss for provincial governments.
As such, “the hike was a revenue loser on a national scale,” writes study author Alexandre Laurin, director of research at the Institute.
In December 2015, the Trudeau Liberals announced that the tax rate on income over $200,000 would go up four percentage points, from 29 per cent to 33 per cent. This was meant to help offset the revenue losses from the government’s signature “middle class tax cut,” which reduced the tax rate on incomes between about $45,000 and $90,000 by 1.5 percentage points, from 22 per cent down to 20.5 per cent.
Tax data from the Canada Revenue Agency (CRA) revealed this summer that Ottawa’s tax hike failed to live up to its revenue-boosting expectations in its first year of implementation. The numbers showed that high-income earners actually paid $4.6 billion less in federal tax in 2016, the first year the tax changes took effect. That was a far cry from the $3 billion in new revenue that the Liberal Party’s campaign platform said the new tax would raise.