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Internal Finance Canada document says Liberal “middle class tax cut” actually benefits the rich

Does someone earning a $199,000 salary sound "middle class" to you?

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Does someone earning a $199,000 salary sound “middle class” to you?

Internal documents obtained by PressProgress through access to information show even Finance Canada thinks the Liberal Party’s “middle class tax cut” actually benefits much of Canada’s richest 10%.

That finding is contained in a Finance Canada analysis of the Liberal Party’s 2015 platform commitment on “reducing taxes on the middle class.”

FINAC-middleclasstaxcut2.jpg

According to Finance Canada, the Liberal platform’s promise to reduce taxes on the second tax bracket effectively means a tax cut for those in higher brackets too.

“Individuals in the third and fourth tax bracket,” Finance Canada points out, “also benefit from a reduction in the second tax bracket.”

That’s because those in higher tax brackets pay tax at a lower rates on their first $44,701 and then $89,401 of income.

So when the Liberals cut the tax rate on the second bracket (incomes ranging between $44,701 and $89,401) from 22% to 20.5%, those in the third and fourth tax brackets received a tax cut, as well.

The third tax bracket covers all tax filers who earn between $89,401 to $138,586.

The fourth tax bracket covers anyone earning more than $138,586.

Those in the third and fourth tax brackets represent the top 9% of all tax filers in Canada.

Finance Canada’s analysis also shows only one-in-three tax filers see any benefit from the Liberal “middle class tax cut.”

FINAC-middleclasstaxcut.jpg

Finance Canada’s analysis reinforces a previous analysis by the Parliamentary Budget Officer, which found “the reduction of the second bracket tax rate will benefit the top 30 per cent of earners.”

The Liberals created a new tax bracket taxed at 33% for those earning over $200,000, except that group only represents 1.3% of all tax filers.

In other words, the major gains from the “middle class tax cut” will go to the top 10%, minus the top 1%.

pbo-distribution-taxbrackets.jpg

Although the the Liberal platform claimed their tax cut would mean “$3.0 billion in annual tax relief” for middle class Canadians, it appears that’s not entirely accurate either.

Of the promised $3 billion tax cut, $1.5 billion actually goes to those in the third bracket and higher earning over $89K, points out Broadbent Institute senior policy advisor Andrew Jackson.

So in reality, half of all the benefits from the “middle class tax cut” end up in the hands of Canada’s top 10% of tax filers.

Canadians earning less than $45,000 receive no benefit from the “middle class tax cut.”

The Liberals previously criticized Stephen Harper’s Conservatives for implementing tax policies that saw “benefits mostly going to wealthy Canadians.”

Photo: PMO.

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