By: Hugh Mackenzie
Who wins from the Budget's tax cuts?
An analysis of the impact of these changes, taken together, shows a distribution of benefit that is very different from that implied by the middle-class tax break rhetoric.
The model used in the analysis is based on 1996 Revenue Canada data on personal income tax revenue. These data present income reported and deductions claimed, by income range, in sufficient detail to permit estimates to be made of the impact of changes in tax provisions on taxpayers in each income range. These results do not take into account the impact on the budget of changes linked to family or household incomes, such as the indexation of the GST credit and the improvement in the Child Tax Benefit.
The results of the analysis are presented in Chart 1, below. The solid line represents the percentage of taxpayers whose incomes place them in or below each income range. The dotted line represents the percentage of the total benefit from the Budget's tax changes going to taxpayers with incomes in or below each income range. The percentages appear on the left axis of the chart.
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The vertical bars show the average tax savings received by taxpayers in each income range. For example, the chart shows that 70% of taxpayers reported incomes below $40,000 in 1996. That 70% of taxpayers will receive approximately 36% of the total benefit from the tax cuts.
The results call into question the claim that this is a middle income tax cut program. The 39% of taxpayers with incomes between $25,000 and $50,000 will receive roughly 27% of the benefit from the tax cut. The 2% of taxpayers with incomes above $100,000 will receive 19% of the benefit from the tax cut.
The average taxpayer in the $50,000 to $60,000 income range will benefit from a tax cut averaging $849; taxpayers with incomes over $250,000 will get a tax cut averaging more than $11,600.
Approximately 64% of the benefit will go to the highest-income 30% of taxpayers. More than 42% of the benefit will go to the top 10%.
Martin's tax cuts in context
The only positive note suggested by the analysis is that, if Martin had opted for any of the suggestions advanced by the Government's critics from the right, the impact would have been worse - even more heavily tilted towards high-income Canadians.
But that is small comfort for the vast majority of Canadians who ranked action on such issues as health care, education, child poverty and homelessness far above tax cuts on their personal priority lists.
This budget will leave Canadians asking, what happened to the children's budget? It will leave Canadians wondering what has to happen to our health care system to get a response from the Government of Canada. It will leave Canadians appalled at the twisted priorities that put more weight on cutting capital gains taxes for the highest-income 1% of taxpayers than on dealing with the crisis of homelessness in all of our major cities.
This budget begs one overriding question about this Government's priorities. Imagine any government creating any program costing $13 billion, designed explicitly to deliver 19% of its benefits to individuals with incomes over $100,000 a year. Inconceivable, you say? Yet that's exactly what this Federal Budget in effect does.
Forget about the rhetoric about giving money back to Canadians who sacrificed to win the battle against the deficit. This budget gives most of the medals to those who never went near the battlefield.
Hugh Mackenzie is Research Director at the United Steelworkers of America and a Research Associate with the Canadian Centre for Policy Alternatives.
From Canadian Centre for Policy Alternatives, Behind the numbers: Economic facts, figures and analysis Volume 2, Number 5 - February 29, 2000
Related Article
The real story of the Martin tax cut budget; Part I
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