Winners and losers in years of tax changes

The Liberals have been cast as big tax cutters. But not everyone comes out ahead, based on the budget.
Poor individuals are the big winners; middle-class two-income families are the losers in terms of provincial and municipal tax bites.
Since 2005, the budget documents have included a chart showing the impact of taxes and fees on people in different income brackets and family situations. It’s a limited sample, but useful.
The latest budget shows of the two of the six selected examples are paying more to the province than they did six years ago.
A two-income family with two children and a household income of $90,000 — about average now for that demographic cohort — will pay 10 per cent more than they did six years go. Their “total provincial taxes” will be $9,427 — or $16 more a week than they paid in 2006.
The same family with a $60,000 household income will pay about four per cent more to the province, or about $5 a week.
Income tax is only part of the equation. The $60,000-income household will pay $690 less in income taxes, but more in MSP premiums, the HST, property taxes and the carbon tax, all included in the budget document report.
That’s why talking about income tax cuts in isolation isn’t useful; other fees and taxes are significant. For the $60,000 family, provincial income taxes are about 20 per cent of the total taxes paid to provincial and municipal governments.
The biggest reduction — at least in percentage terms — went to a single person with $25,000 in income. In 2006, someone in that unpleasant situation paid $1,520 in taxes and fees. This year, according to the budget, the provincial and municipal take will be $1,130, a 25-per-cent reduction.
Sounds good. But at $2,100 a month — figure a $13-an-hour full-time job — you’re struggling. And an extra $7.50 a week because of tax and fee changes isn’t life-changing.
An individual with an $80,000 income is paying about four per cent less in provincial and local taxes — about the same cut, in dollars, as the person getting by on $25,000.
The one senior example, a couple with equal pensions that provide $30,000 in income, basically break even. They’re paying the same amount in 2011 they did in 2006.
The real losers, in practical terms, are poor families. The budget looks at a family of four with two working parents and a total income of $30,000.
Those are people on the edge; their children growing up poor. But they paid $2,450 in provincial taxes and fees in 2006 and they will pay $2,100 this year. The reduction is about $7 a week, a dollar a day. That’s not going to change their children’s lives for the better.
The big tax cuts over the past six years have been in federal income taxes. The $90,000 family is paying $8,000 in federal income taxes, $2,500 less than in 2006.
When we spend money on most things, we’re concerned with value for money. We’ll spend more to get a reliable car.
But somehow lower taxes have become an unquestioned “good thing,” without considering the value of paying a little more.
Look at the middle-income family of four. They paid $2,000 in provincial income taxes in 2006, and will pay $1,300 in 2011. But what’s the benefit of $700 in tax cuts if one result is underfunding for public schools that means parents opt for private schools? The $700 in tax savings would be replaced by at least $15,000 in school fees for the two children.
Two observations leap out. The Liberals’ tax-cutting reputation is overblown.
And none of the leadership candidates, for either party, have been brave enough to suggest that government can — and does — provide services that people should be happy to pay for.