Prime Minister Justin Trudeau looks on as Deputy Prime Minister and Finance Minister Chrystia Freeland responds to a question during a news conference on Parliament Hill in Ottawa, Tuesday, Aug. 18, 2020. THE CANADIAN PRESS/Adrian Wyld

Prime Minister Justin Trudeau looks on as Deputy Prime Minister and Finance Minister Chrystia Freeland responds to a question during a news conference on Parliament Hill in Ottawa, Tuesday, Aug. 18, 2020. THE CANADIAN PRESS/Adrian Wyld

Federal study details workers hit hardest by tax, benefit system for extra earnings

OTTAWA — Newly released documents show Finance Department officials calculated that workers near the bottom of the income ladder are dinged hardest for extra earnings than anybody else, including those at the top.

Besides paying more tax, making more money can mean losing other benefits aimed at alleviating poverty.

Understanding who loses more from earning more, and what federal programs are involved “can guide the development of approaches to ease the burden … and encourage additional work,” officials wrote in the documents.

Workers with modest incomes, between about $25,000 and $34,000, lost $413 for every $1,000 in extra earnings, the highest clawback of any income level.

Just behind them were the top 10 per cent of workers, with incomes over $114,570, who gave up $402 for every $1,000 of additional earnings.

Paying more in taxes was the culprit for those making the most, while those near the bottom faced a double-whammy of taxes and drops in income-tested benefits, such as the Canada Child Benefit.

Overall, the country’s 19 million workers would have lost, on average, $341 for each $1,000 boost in their earnings based on the 2017 data the paper relied on, but the burden was heavier for workers with children.

Officials noted that being not much better off, or faring even worse, after a boost in earnings could be a disincentive for taking extra work for those employed, and could keep others out of the job market.

The latter situation was one the documents describe as particularly pronounced for “secondary earners.” Those are people who make less money than their partners — usually women.

The Canadian Press obtained a copy of the reports and associated briefing note through the Access to Information Act.

The reports delivered in early November, days after the federal election that saw the Liberals returned to power with a minority in the House of Commons, came as the public service was trying to solve a suite of issues facing an aging workforce.

Experts who reviewed the document suggested the findings could help guide federal efforts now as the Liberals attempt to massage taxes and pandemic-related benefits.

Elliot Hughes, who was a tax-policy adviser to former finance minister Bill Morneau, said a sweeping review of the tax system seems like a must to see how the country can make sure those who need support get it, while also not creating disincentives to work.

It’s politically problematic, and likely would take two years to get done, Hughes said, but “I don’t know how you avoid one now.”

“COVID, and all of the benefits that have been added in, and all of the challenges that COVID has exposed or accelerated makes a review of taxes and support and benefit programs … even more important than ever,” said Hughes, now at Summa Strategies.

Clawing back benefits faster as incomes rise may not help to promote workforce participation, said Garima Talwar Kapoor, policy and research director at Maytree, an anti-poverty think-tank.

Talwar Kapoor also said that any conversation about taxes and benefits needs to consider other issues that affect work decisions, such as the cost of child care, gaining access to dental benefits through an employer’s plan, or whether the job itself is appealing.

“A number of factors matter when people decide whether they’re going to work or not, and whether government design fits public policy,” she said.

“I’m worried that in absence of really thinking of good jobs, we often default to decrease the benefits provided without thinking about the impact that it has on people over the longer term.”

Just Posted

A rodeo south of Bowden drew a huge crowd on May 1 and 2, 2021. (Photo courtesy Mom’s Diner’s Facebook page)
Organizers of central Alberta anti-lockdown rodeo plead not guilty

Ty and Gail Northcott charged under the Public Health Act

(Black Press file photo.)
Road closures at both ends of Red Deer next week

Red Deer motorists should expect delays with road closures in the north… Continue reading

(File photo by Advocate staff)
37-year-old from Red Deer dies in highway crash

An individual from Red Deer has died after a collision on Highway… Continue reading

Grade one teacher Heidi Dimou arranges the desks in line with physical distancing policy in her class in preparation for the new school year at the Willingdon Elementary School in Montreal, on Wednesday, August 26, 2020. THE CANADIAN PRESS/Paul Chiasson
Alberta students expected to return to in-person learning next week

Kids can anticipate a return to the classroom next week in Alberta.… Continue reading

Red Deer musician Curtis Phagoo is glad the Alberta government is investing $2 million to help the province’s live music industry, but he would have liked the criteria to be expanded, so the money could be used as relief to cover revenue shortfalls. (Contributed photo by Cory Michaud)
Red Deer musicians welcome $2M in grants to help live music, but would have preferred relief program

The money is for future projects and can’t be used for retroactive expenses

(CPAC)
Trudeau says he knew about investigation into general overseeing vaccines weeks ago

OTTAWA — Prime Minister Justin Trudeau says he learned weeks ago that… Continue reading

Canadian and American flags fly near the Ambassador Bridge at the Canada-USA border crossing in Windsor, Ont. on Saturday, March 21, 2020. Canadian residents are allowed to head to the United States for a COVID-19 vaccine and avoid quarantine on return if they meet some straightforward conditions, the Public Health Agency of Canada confirms.THE CANADIAN PRESS/Rob Gurdebeke
Canadians can drive to U.S. for COVID-19 vax and avoid quarantine, Ottawa confirms

TORONTO — Canadian residents are allowed to head to the United States… Continue reading

Prime Minister Justin Trudeau holds a press conference in Ottawa on Tuesday, May 18, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Quebec can modify part of the Canadian Constitution unilaterally: Trudeau

MONTREAL — Prime Minister Justin Trudeau says Quebec can unilaterally modify part… Continue reading

In this Thursday, April 29, 2021, file photo, giant bucket-wheel excavators extract coal at the controversial Garzweiler surface coal mine near Jackerath, West Germany. Canadian environmentalists are welcoming a report from the International Energy Agency that says new fossil fuel investment must end if the world is to meet its climate goals. THE CANADIAN PRESS/AP -Martin Meissner
Canadian environmentalists happy with International Energy Agency report

Environmentalists say a report from the International Energy Agency that concludes investment… Continue reading

Prime Minister Justin Trudeau holds a press conference in Ottawa on Tuesday, May 18, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Ceasefire needed in Israeli-Palestinian conflict to avoid loss of more civilians: PM

OTTAWA — Prime Minister Justin Trudeau says Canada is calling for a… Continue reading

A forest fire burns late into the evening northeast of Prince Albert, Sask., on Monday, May 17, 2021. THE CANADIAN PRESS/Kayle Neis
Saskatchewan wildfire grows, forcing evacuations in the area to expand

PRINCE ALBERT, Sask. — Dry conditions and strong winds caused a large… Continue reading

A man makes his way past signage to a mass COVID-19 vaccination centre at the University of Toronto's Mississauga campus during the COVID-19 pandemic in Mississauga, Ont., on Monday, May 17, 2021.  THE CANADIAN PRESS/Nathan Denette
Tam hopeful for summer even as Canada hits grim death milestone in COVID-19 pandemic

OTTAWA — Chief Public Health Officer Dr. Theresa Tam says she expects… Continue reading

Sheffield United’s Daniel Jebbison celebrates after scoring his side’s opening goal during the English Premier League soccer match between Everton and Sheffield United at Goodison Park in Liverpool, England, Sunday, May 16, 2021. THE CANADIAN PRESS/AP-Alex Pantling/Pool via AP
Canadian teenager Daniel Jebbison turns heads with Premier League goal

Jebbison, 17, is the youngest player in Premier League history to score on his first start in England’s top tier

Most Read