OTTAWA — For a year of few or no tax changes, Canadians will still be paying quite a bit more to governments and public agencies starting Jan. 1.
Except businesses, of course, which will be popping champagne corks in the new year thanks to a generous, 1.5 percentage point cut to their tax rate that will save the corporate sector about $1.65 billion.
For working Canadians, however, 2011 will go down as the year they saw their net pay stubs shrink, in some cases by significant amounts.
“Everybody loses, but some people are bigger losers than others this year,” says Derek Fildebrandt, national research director with the federation.
“It’s not a direct increase to actual income taxes, but the way it works out, we are going to be paying more from our paycheques towards the government.”
All workers will be paying higher premiums for employment insurance and the Canada Pension Plan, adding up to $76 more on anyone earning greater than $44,200.
But a quirk in the way Ottawa indexes tax brackets to adjust for inflation means most Canadians will be paying higher income taxes as well, says the Canadian Taxpayers Federation.
Ottawa calculates the indexing of tax rates using a two-year rolling national average for inflation, whereas workers experience inflation annually and based on where they live and often receive wage increases based on local rates.
According to the federation’s calculations, some families in Ontario — where inflation was highest last year — will wind up paying over $1,000 more in taxes in 2011 compared with 2010.
In order of who pays more, Ontario tops the list, followed by British Columbia and Newfoundland, tied for second, and Nova Scotia in third.
On average, a family with one earner and an income of $45,000 will pay about $184 more in taxes next year. A similar family with an income of $100,000 will pay $437 more.
But in Ontario, those same families will wind up paying $390 and $1,077 more respectively, according to the lobby group.
The trouble, says Fildebrandt, is inflation was about one point higher last year than in the 2009, so many Canadians who got a cost-of-living adjustment in 2010 will be bumped into a higher tax bracket, since it was greater than the two-year average.
Ontario residents would be hit hardest because the province’s inflation rate has been consistently higher than the national average.
British Columbians also are disproportionately impacted by inflation since it could push many, particularly those in lower incomes, into a higher bracket in terms of the province’s health-care tax.
Other changes announced by the federal government, this time on the benefit side, include a 1.7 per cent boost in CPP benefits to a maximum $960 a month, and a 0.5 per cent increase in Old Age Security to a maximum $524.23.
As well, Ottawa is allowing a five-point increase in the deductible portion of meal expenses for long-haul truckers, from 75 to 80 per cent.
But Canadians will no longer be able to receive a federal credit of up to $1,500 for improving the overall energy efficiency of their homes starting Jan. 1.
The major change this year is on the corporate side, where the business tax rate falls from 18 per cent to 16.5 per cent. It is due to fall to 15 per cent in 2012.
The $1.65-billion gift to firms next year, rising to almost $4 billion in 2012, has become a key political bone of contention that is likely to be much debated in the next election campaign.
Finance Minister Jim Flaherty, in a statement released this week, said the reductions place Canadian companies in a good position to compete globally and create jobs at home.
But the Liberal government services critic, Geoff Regan, said Thursday that the Conservatives should put the tax cut on hold and use the money to reduce the deficit and provide relief for ordinary Canadians.
“When our corporate tax rates are already competitive and we have the largest deficit in our history, now is not the time to borrow more to give to profitable corporations, especially not when there are more pressing priorities,” he said at a news conference.
The NDP, which wants an even bigger rollback on business tax cuts, called on the Liberals to put their votes where their rhetoric is and commit to voting against the upcoming Conservative budget.