Remember, CRA is waiting

January is the start of “income tax season” – the period until April 30 when your income taxes must be filed with the Canada Revenue Agency.

If you follow political discussions, you will likely have heard claims that income taxes have gone up as well as counter claims that they have gone down.

I want to review federal income tax changes over the past 18 years for more context on this subject.

In 2000, there were just three federal income tax brackets:

  • $30,004 was taxed at a rate of 17 per cent
  • $30,004 up to $60,009 was taxed at a rate of 25 per cent
  • all income over $60,009 was taxed at 29 per cent.

In 2013, there were some significant changes.

A fourth income tax bracket, up to $43,561, which would be taxed at a lower rate of 15 per cent.

The second tax bracket was adjusted so that:

  • income between $43,562 up to $87,123 was taxed at a rate of 22 per cent
  • the third tax bracket on income over $87,123 up to $135,054 was taxed at a rate of 26 per cent.
  • Income over $135,054 was taxed at 29 per cent

The net effect of these tax changes was that lower income workers earning up to $43,561 paid two per cent less tax.

On income in the other tax brackets, there were also tax breaks of three per cent with the exception of the highest tax bracket.

In the 2016 tax year, there were again further changes to the tax brackets including the addition of a fifth tax bracket.

For the lowest income earners up to $45,202, there was no change and the income tax rate remained at 15 per cent.

On the next tax bracket from $45,202 up to $90,563, taxes were reduced from 22 per cent in 2015 down to 20.5 per cent.

Income between $90,563 up to $140,388 remained unchanged at 26 per cent and income over $140,388 up to $200,000 was taxed at the same 2015 tax rate of 29 per cent.

The new fifth tax bracket on income over $200,000 was taxed at 33 per cent.

The net effect of these tax 2016 changes was that lower income citizens did not receive a tax break, but those in the middle did.

Higher income earners were taxed either at the same rate or more.

For this current 2018 tax year, the income tax brackets remain unchanged at:

  • 15 per cent
  • 20.5 per cent
  • 26 per cent
  • 29 per cent
  • 33 per cent

This comparison does not include the elimination of many income tax credits that have occurred since 2016 nor does it account for the lowering of the GST.

It also does not include the Working Income Tax Benefit that is now referred to the Canada Workers Benefit or to the Canada Child Benefit (CCB).

Depending on your income tax situation, you may be paying more or less since 2000.

Given the scale of tax reduction to many income tax brackets in 2013, combined with the middle income tax bracket reduction in 2016, many Canadians are likely paying less federal income tax today.

Although there have been tax reduction efforts federally, most will know that income taxes in many provinces have risen in addition to increases in property taxes.

My question this week:

  • Are you satisfied with the total amount of tax that you pay for the services and programs you receive?

I can be reached at [email protected] or call toll free 1-800-665-8711.

CPP complaints

Your CPP take-home pay will eventually go up, but it'll cost you.

Last week, I wrote about higher CPP premiums that will increase from 4.95 per cent up to 5.95 per cent gradually between 2019 and 2023, resulting in lower take home pay for many Canadians.

If you have been watching television, it is possible that you may have even come across commercials from the CPP Investment Board that state “you started saving for retirement with your first paycheque.”

I have received complaints over the fact that a true savings account is one that citizens can voluntarily withdraw from, whereas CPP contributions do not offer this flexibility.

I have also received inquiries and comments about CPP and other federal government retirement programs.

For those who may be unaware, here is a summary about the different programs that the federal government administers.

These include the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).

CPP is generally funded equally by you and your employer during your working years.

CPP can provide benefits for loss of income created by disability or retirement. The benefits are ultimately calculated by how much you have contributed and over what length of time.

You can start collecting CPP as early as 60 or as late as 70, however different rates would apply.

In contrast, OAS provides a modest pension to most Canadians at age 65, if you have lived in Canada for at least 10 years.

The maximum OAS payment is for individuals with 40 years or more of residency after their 18th birthday.

Seniors with earnings in excess of roughly $77,580 per year will gradually receive a lesser OAS benefit that ultimately is eliminated for an income in excess of $125,696 a year.

The GIS is specifically for lower income seniors 65 and older with an income of roughly $18,239 annually or less.

If you have questions for any of the above programs, you can contact Service Canada toll free at 1-800-622-6232 for further information.

I have heard many comments over the recent increase in CPP premiums.

One common complaint is that if a person does not live to 65, or not long after, the amount that can be transferred to spouse, after a lifetime of CPP contributions, is comparatively quite limited.

My question this week:

  • Would you support more equitable options to transfer your lifetime CPP contributions to your estate or to another investment program?

I can be reached at [email protected] or toll free 1-800-665-8711.

There's only one taxpayer

It was not long into the new year when a citizen shared with me an email they received from their employer stating:

Statutory Canada Pension Plan (CPP) "deductions are reset for the new year so you will notice a decrease in your net take home pay starting in January.”

The citizen asked if this information was correct and if so, what were the reasons for it?

As I reported back in July and October of 2016, the Trudeau Liberal government raised CPP premium rates.

The changes mean that beginning this year and for every year until 2023, the mandatory CPP contribution rate will be gradually increase from the former rate of 4.95 per cent up to 5.95 per cent in 2023.

It is true that in most situations, your net take home pay will be less because of this CPP increase.

Likewise, for an employer the costs of making payroll will also correspondingly increase.

The intent of these CPP changes is to increase the total annual CPP benefit (assuming an individual reaches age 65).

As an example, the current maximum CPP benefit is $13,110 a year.

This CPP maximum benefit would increase by $4,390 a year up to a new maximum of $ 17,500 annually.

Keep in mind, the maximum benefit figures only apply to those who contribute the maximum CPP contribution for roughly 40 years.

For most workers, the rates will vary.

One of the downsides to the CPP program is that it is not a transportable retirement investment.

For citizens who do not live to reach 65 or only live a few years beyond 65, a lifetime of contributions paid to CPP are of no significant benefit to a spouse or family because the full value of the contributions cannot be transferred through to an estate.

So where would those unused CPP contributions end up?

One of the lesser known criticisms of CPP is the fact that your CPP contributions are being consumed by significantly rising administration costs.

Operating costs went from $3 million in the year 2000 to $803 Million in 2015, not to mention external management fees that have risen from $36 million in 2006 to $1.25 billion in 2015.

These are serious administration increases.

The Canadian Federation of Independent Business (CFIB) released a poll indicating that 70 per cent of business owners have indicated that the costs of the CPP premium increase will create cost pressures to freeze or cut salaries.

While an increased CPP benefit may appear to help younger people the most, perversely higher payroll taxes can discourage hiring of youth, who already face significantly higher unemployment rates due to a lack of experience.

For some, finding that first job will be tougher.

In response to these increased costs, the Trudeau Liberal budget for 2019 will lower the small business tax rate to nine per cent.

This was the same small business tax cut that was originally legislated by the former Conservative government, cancelled by the Trudeau government in Budget 2016 and was only reinstated after significant political pressure.

My concern is with reduced take home pay, courtesy of the increased CPP deductions, coupled with recent provincial announcements to increase ICBC rates while many local governments increasing property taxes at rates beyond inflation.

Citizens are being collectively squeezed by all levels of government.

From my perspective, it should never be overlooked that there is only one taxpayer. When the prime minister refers to the concept of a balanced budget as being an “austerity” measure, this points to a road of future tax increases to pay for deficit spending.

My question this week is a simple one:

  • Are you concerned by having your net take home pay reduced by increased CPP premiums?

I can be reached at [email protected] or toll free at 1-800-665-8711.


Air-passenger protection?

Earlier this week, the federal government announced the most recent update on the proposed air passenger protection regulations. 

Although this current proposal may undergo further consultation and is subject to change, it appears close to being finalized for adoption.

So what is being proposed? 

There are a number of measures on a variety of different topics that I will highlight here. 

Please note the length of my report does not allow for a full summary.

Delay and Cancellations: 

  • Depending on whether the reason for a delay or cancellation is within airline control, and is not related to safety, passengers may be eligible for financial compensation. The amount of compensation varies due to the length of the delay and also if the delay occurs on a “large” or “small“ airline. A delay between three to six hours can result in $125 on small airline per traveller or $400 on a large airline.

Denied boarding: 

  • If a passenger is denied boarding for a reason that is within control of the airline and not safety related, for example from overbooking, a passenger can receive compensation of $900 for up to 6 hours of delay, $1,800 for six to nine hours of delay and $2,400 for a delay over nine hours.

Tarmac delays:  

  • Although there is no proposed compensation for a tarmac delay a three-hour maximum time limit is proposed unless takeoff is believed to be imminent.

Seating of Children: 

  • Depending upon the age of the child, airlines will not be able to charge for specific seating and must seat a child within certain defined proximities of the parent or guardian travelling with the child.

Loss of luggage:

  • Although it is seldom referenced, currently there are already legal obligations to compensate passengers for lost luggage that exist under the Montreal Convention agreement. 

As our current laws stand, up to $2,100 is available as compensation on international flights. It is proposed that this same level of protection will now apply to domestic flights within Canada.

This final point is what critics of the Passenger Bill of rights frequently point out. 

For decades, Canada has had many aviation related laws that benefit passengers. These laws have largely been ignored or not followed properly by airlines. 

Critics also reference a lack of enforcement for these violations by the Canadian Transportation Agency. 

Recently, CBC has broadcasted stories on air travellers who have been mistreated by airlines that share this criticism.

From my perspective, it is understandable that some would have concerns that the Bill of Rights does not go far enough or that it undermines current passenger rights that have largely been ignored and not enforced. 

There are also concerns that passengers travelling on smaller airlines are getting short changed with less compensation available if an infraction occurs. 

However this new proposal does include penalties to airlines of up to $25,000 per incident for non-compliance. 

There is clearly a fair bit of discretion that will be required to determine infractions and setting actual penalty amounts but the intent for compliance, in my view, is clear. 

The bigger question is will more resources be made available to actually investigate and enforce these incidents or will passengers be left on their own to settle disputes at the discretion of the airlines?

My question this week:

  • Do you believe the proposed Passenger Bill of Rights regulations will create significant changes in air travel or will it largely be ignored? 

I can be reached at [email protected] or call toll free 1-800-665-8711.

More Dan in Ottawa articles

About the Author

Dan Albas, Conservative member of Parliament for the riding of Central Okanagan-Similkameen-Nicola, is the shadow minister of innovation, science, economic development and internal trade, and sits on the standing committee on finance.

Before entering public life, Dan was the owner of Kick City Martial Arts, responsible for training hundreds of men, women and youth to bring out their best.

In British Columbia, Dan has been consistently one of the lowest spending MPs on office and administration related costs despite operating two offices to better serve local constituents.

Dan is consistently recognized as one of Canada’s top 10 most active members of Parliament on Twitter (@danalbas) and continues to write a weekly column published in many local newspapers and on this website.

He can be reached at [email protected] or call toll free at 1-800-665-8711.

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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