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Liberals to proceed with tax cut for middle earners, higher rate for richest

The Liberal government is poised to make good on its promise to cut federal income taxes for middle earners by raising the rate on the richest Canadians.

OTTAWA — The Liberal government is poised to make good on its promise to cut federal income taxes for middle earners by raising the rate on the richest Canadians.

The government will introduce a motion today in Parliament that will slash the income-tax rate on Canadians earning between $44,700 and $89,401 per year.

The Liberals said they would impose a higher tax rate on earners in the top one-per-cent -- those who make more than $200,000 per year -- as a way to finance the vast majority of the middle-income relief.

But experts say hiking the tax rate on the highest earners won't generate enough revenue to offset the cost of the tax cut because efforts to avoid taxes will probably be greater than anticipated, while the reduction itself could cost more than expected.

The Globe and Mail is reporting today that the government will concede this week that the tax hike won't cover the entire cost of its cut.

Combined with the sting of the struggling economy, the new Liberal government is already facing increasing pressure to meet its election vows to cap annual deficits at $10 billion over the next two years and to balance the federal books in the fourth year of its mandate.

The Liberal promise to rejig the tax brackets was a central pledge in the campaign platform that helped propel it to victory in October.

Finance Minister Bill Morneau is scheduled to hold a news conference later today.

Ottawa is also expected to cancel the previous government's move to increase the contribution limit on tax-free savings accounts from $5,500 to $10,000.