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Analysis

Morneau’s Latest Tax Cut: Will $37 A Year ‘Lift’ Canadians Out of Poverty?

It's about $3.08 or $11.41 per month, respectively.

The federal government’s claims its “middle-class tax cut” will lift 40,000 Canadians out of poverty strike oddly against calculations the cut will save lower-income Canadians between $37 and $137 per year.

Speaking in the House of Commons, Monday, Minister of Families, Children and Social Development Jean-Yves Duclos praised Finance Minister Bill Morneau’s plan to extend the Basic Personal Amount (BPA) exemption from $12,000 to $15,000, this coming January.

Duclos said:

“Twenty million Canadians will get a tax cut and 40,000 Canadians will be lifted out of poverty thanks to this one measure.”

According to Statistics Canada’s Dimensions of Poverty Hub, Canada’s official poverty line for a family of four averages $37,542 per year. It’s about half of that for a single individual.

Calculations by University of British Columbia economics professor Kevin Milligan note families with incomes up to $20,000 only save $37 per year with the cut, while families earning $20,000-40,000 save only $137 per year.

That comes out to about $3.08 and $11.41 per month, respectively.

Canadian Centre for Policy Alternatives senior economist David Macdonald told PressProgress “It’s very close to a rounding error. It’s almost an accident that there’s an impact on poverty here.”

Macdonald said the Liberals’ 40,000 figure is likely based on a Finance Canada simulation that estimates the number of families with incomes just below Canada’s official poverty line.

But even they are only a few dollars from the poverty line, he noted. “The people at the low end might get a couple of extra dollars that gets them slightly above this line and therefore they don’t count in the poverty counts.”

As PressProgress reported previously, the tax cut will mostly benefit the already well-off. Milligan calculated the Liberals’ tax cut will probably save those making from $150,000-250,000 most — $626 per year.

“The people that are most likely to benefit are dual-earning families in the ninth out of tenth deciles making between $140,000 and $200,000,” Macdonald said.

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