Knowledge Bureau Poll: Tax Cut Doesn’t Cut It!

Evelyn Jacks

The Notice of Ways and Means Motion was released on May 27, but the 1% tax rate cut going into effect on July 1, didn’t cut it with Knowledge Bureau Report readers who responded to our May Poll.  A decisive 90% of respondents said “No” when asked: does the new government’s promise to cut the lowest personal income tax rate by 1% to 14%, (14.5% in 2025) go far enough to help Canadians impacted by high costs?  Here were their comments and suggested alternatives based on real life experiences with the after-tax income their struggling clients are left with:

Jodi said: “It’s a start.  But I’d like to see some encouragement for entrepreneurs.  A tax return with a net self employment income of just $26,000 and they owe $4K between taxes and CPP.  And that’s in Alberta, it would be even more in some other provinces.  Or a single senior living off CPP and OAS supplementing her income by cleaning houses:  bringing in just $20K in self employment income and owing $6,500.  Not quite 65 so can’t opt out of CPP.  The people who are trying to work for their living are hurting the most.”

Amy Lupa agreed but went one step farther, strategically:  “Cutting the tax rate 1% is a beginning. However, in my opinion what is really needed is to simplify the personal income tax return. Not necessarily a popular suggestion to a group of tax preparers, I suppose.”

Pat Gamberg was more succinct about unaffordability at the lower end:  “The powers that be have absolutely no idea what folks on the lower end of income pay.  I did a return for a young person who just graduated in June 2024.  Worked at Sobeys part time while in school, got a full time job after graduation.  Total income for the year $26,550, total taxes owing $2427 in NS. leaving $24,123 to live on.  1% is almost meaningless for that person. If he lived in AB, he would pay $881 less.  But still not enough to live on.  A realistic minimum income would go a long way to cutting back on medical and social costs across the country.”

Editorial Note:  How about a Basic Personal Amount of $25,000?  Why are we taxing minimum income levels at all?

Sandra Gibbs echoed our Editorial Note:  “Reductions in taxes for the lowest income persons in Canada will always be welcome. Having said that, I have always been a proponent that the Basic Exemption limit should be equal at least to the poverty level in Canada.”

So did Derek T.:  “I’ve long felt that it would be good policy to increase the basic personal exemption significantly.  While this would impact everyone, it would have a proportionally higher impact on lower income Canadians. Then we could begin to have a discussion on what tax policy ought to look like in Canada…I won’t hold my breath though.”

Stephen Cheung added sage perspective, and a good follow up question to Derek’s comment:  “In order to have money one needs to explore ways to get sources of money AND explore ways to reduce spending.  There is a Chinese saying with exactly that meaning : OPEN source, reduce dripping.  Every bit helps. Avoid the sights of every family going broke and some becoming criminals.  Such social cost is going to be unbearable. What would the leaders do?  Wait till the next election?!”

Doris Woodman-McMillan chimed in:  “I have ZERO belief that they will follow through.  I also believe that now they have finished the election, the carbon tax will be back.  Because it never left.”

Last word to Matt Valenti who on April 30, the tax filing deadline, couldn’t have been clearer about the extent to which this tax cut helps with affordability:  “Not even close, an absolute joke . . .”

The Bottom Line:  The federal minimum wage is currently $17.75 per hour, effective April 1, 2025, and applies to federally regulated industries. This equates to just over $3000 a month working full time.   Taken in the context of increasing Canada Pension Plan premiums, the income tax cut does not offset the mandatory payments Canadians must make throughout the year.

It appears from this response, from an affordability point of view, Canadians need to lobby their federal government – well in advance of a Fall Budget - to take the easy and administratively efficient route to putting more money in the jeans of average Canadians.  That is, raise the Basic Personal Amount.  Stop taxing people who are trying to make ends meet at the poverty line, which depending on the city you live in, is about the amount of the minimum wage level for a typical household.   That will go a long way to spurring on economic development in Main Street Canada.

Thanks to all who participated.  Our June poll is the following – please weigh in:

Are your clients owed money by CRA? As of March 31, 2025, the CRA holds about 10.2 million uncashed cheques totalling $1.7 billion. In your view, why is this happening?