Canada Day income tax changes. | Page 2 | Income tax filing | Discussion forum

The feds will need to slash dept. budgets, there's no alternative. So was the directive to ministers from the treasury board. Increasing taxes will just exacerbate the economic situation further. They were just all over the place post Covid, and not necessarily investing in places that boost the economy. Tariffs is just an added bonus...economy mismanagement, for sure.

Highest marginal tax rates https://taxsummaries.pwc.com/quick-charts/personal-income-tax-pit-rates

The issue is unless one compares individual brackets by purchasing power parity, the marginal rates do not mean much on their own.

I am not particularly fond of the taxes I pay at the MTR but I cannot complain too much for my 'average tax rate' that shows up via tax software. The bigger issue in my mind is the waste that goes on with a bloated civil service (operations), the number and cost of useless programs, and the sad state of incompetent procurement. I would hazard a guess our deficit would be half of what it is if a proper scalpel was taken to waste.

google's AI told me a third of Canada's federal debt (I don't know about provincial or municipal debt) is foreign owned, so about two thirds of those debt interest payments are to Canadians. So hopefully much of that is somehow spent and recirculated in our domestic economy.

Not advocating more debt, at all, but maybe it's not as bad as it seems.

Norman1 on here, who seems to know pretty much everything about money, as of a couple of years ago I believe was saying Canada's debt levels are not a big problem, I'm not sure if he still holds that view.

Bill said
google's AI told me a third of Canada's federal debt (I don't know about provincial or municipal debt) is foreign owned, so about two thirds of those debt interest payments are to Canadians. So hopefully much of that is somehow spent and recirculated in our domestic economy.

Not advocating more debt, at all, but maybe it's not as bad as it seems.

Norman1 on here, who seems to know pretty much everything about money, as of a couple of years ago I believe was saying Canada's debt levels are not a big problem, I'm not sure if he still holds that view.  

Do we really want to go back to 1994-1997 Paul Martin's osterity measures because the national debt got out of control?

MattS said:

In my lifetime, I’ve seen people who used to bag groceries at the grocery store 40 years ago with a wife that didn’t work or only worked part time be able to own a middle class bungalow and be middle class as long as you’re willing to work.

I'm old enough to remember that, too, and is wasn't "40 years ago." it was pre-1980! Most of the single-menial-wage-earners who owned houses bought them with government assistance in the post-war fifties and sixties. (And marginal income tax rates went up to 80%!) And homes got more expensive too, because of improved building standards.

In Quebec, where I grew up, housing was always cheap. For one thing, the cities (rather than developers) put in all the utilities and amenities, so home buyers didn't have to pay all those costs up front; they paid them over time in higher property taxes, the costs being carried by the cities at much lower interest rates than private developers.

And the stock of aging housing and the low-to-negative population growth helped a lot. Today, financialization of housing has driven home costs in Quebec to levels rivaling other major Canadian cities.

In many developed European countries, income (way over 50%) and sales (mostly over 20%) tax rates are MUCH higher than Canada's, and their populations report much happier lives. It's really only when compared to the USA that our taxes seem high.

But mostly it's the outlandish profits in real estate, and the expectations that it will always go up, that have made housing unaffordable. Two-income families have more money to compete for housing with, and Airbnb and legal and illegal suites that help people bid up, keep the property myths alive. Tax and other government benefits, and super-long-mortgages, mean most of the "gains" go to lenders, not homeowners.

Property speculation is NOT MONEY EARNED BY HARD WORK! It's hoping for a freebie at the expense of others.

Completely agree, mordko, and my experience with central European extended family bears out exactly what you say.

"But mostly it's the outlandish profits in real estate, and the expectations that it will always go up, that have made housing unaffordable." Not at all. Whether someone is making an "outlandish" profit (no such thing, who gets to decide the line for outlandish vs acceptable?) is irrelevant to my bid for his property for sale. The market determines what willing sellers and buyers will settle on, end of story. And when people are buying a home they are looking at what they can afford, not how much it's going to increase in value. Which is irrelevant anyway because you will always need to find another house if you sell, you need to live somewhere.

And what's wrong with making money with your brain instead of "HARD WORK", is there just one acceptable method of making money?

I'd argue that though housing is unaffordable for some it is obviously affordable for many people, otherwise properties would not sell and prices would decline. Though there are some ups and downs obviously housing is very affordable in general, in my lifetime there has never been a sustained crash across the entire nation.

Many immigrants coming today have lots of money (unlike after WWII immigration when people arrived with next to nothing), and with the large numbers coming for decades now obviously that has a major effect.

And in the 1970's educated women of the bubble Me Generation began entering the workforce en masse (exactly when housing prices started to rise a lot compared to the stability of the 1950s and 60s), all of sudden a doubling of family income that remained as a permanent feature of life now for the last 50 years or so has had major impact on the price of housing, along with everything else. When my wife and I started working we might have been able to save $1,000/year on one salary, with two we could now save, say, $21,000/year, 21 times as much! And all our peers were in the same situation, pretty much, that 2nd full-time, earner was HUGE in terms of how we lived compared to our parents and grandparents, wasn't even close.

Overnight rate peaked at around 15% in 1990 and stayed at about 10% through the decade. Now its 2.75%. Debt servicing average rates tend to average multi-year periods, but our debt levels make federal budget particularly vulnerable to inflation. Even more problematic is how the debt is increasing at various levels of government; Federal debt is not the full picture by any means. Its can’t really be isolated from the total.

In the 90s Canada was saved because US economy grew super fast and that pulled Canada out of the debt hole as GDP grew faster than expenditure. I wouldn’t bet on the same scenario this time around.

What is most worrying is the trend. If we look at the total government debt (including provincial and local), Canada’s 2024 debt is ~ 110.8% of GDP, the highest increase among G7 countries over the last decade (from 2014 to 2024). It's a bad position to be in, particularly in the current environment. The last decade was easy. Going forward the government’s hands will be forced, whether they like it or not. Won’t be pleasant.

mordko said
Overnight rate peaked at around 15% in 1990 and stayed at about 10% through the decade. Now its 2.75%. Debt servicing average rates tend to average multi-year periods, but our debt levels make federal budget particularly vulnerable to inflation. …

No, it doesn't. Governments borrow long term through long-term bonds. Not variable rate lines of credit. Rates are locked in until the bonds mature years and decades later.

That 2.7% rate on the $8.75 billion borrowed by federal government in 2014 through their CA135087C939 bonds is locked in for 50 years until 2064. There's also $32 billion borrowed in 2021 locked in at 1.75% until 2053 through CA135087M680. Just like the federal government is still paying 8% on the $3 billion borrowed in 1996 through their CA135087VW17 bonds.

Inflation is actually good for issuers of long term bonds. That $8.75 billion due 50 years later isn't going to be as hard to come up with, thanks to inflation, as the original $8.75 billion was.

In the 90s Canada was saved because US economy grew super fast and that pulled Canada out of the debt hole as GDP grew faster than expenditure. I wouldn’t bet on the same scenario this time around.

Canada was saved because Canada raised taxes and reduced benefits. That's easier to justify to voters when debt servicing was approaching 40% of revenues.

One example is the OAS clawback on higher earners that was introduced and is still with us.

Another is the conversion of the Basic Personal Exemption deduction to a fixed Amount so that higher earners didn't get a higher dollar benefit than lower ones. An income tax hike on everyone not in the lowest bracket.

Income tax brackets, credits, and exemptions were partially de-indexed for a time. An automatic tax increase. Fortunately, full indexing has since been restored.

Canada's debt turnaround in the late 1990s was more than just austerity—it was propelled by a booming U.S. economy, which:

1. Stimulated exports, fueling GDP growth.
2. Raised revenues, aiding deficit elimination.
3.Lowered debt ratios, coinciding with rising U.S. demand.

Canada’s exports to the U.S. surged from CAD $111 billion in 1990 to CAD $308 billion by 1999, meaning ~75% of exports were U.S.-bound those years.

By the late 1990s, Canada’s export-to-GDP ratio climbed to approximately 70%, up significantly from earlier in the decade; exports outpaced household spending and business investment as a primary driver of GDP growth.

This export surge coincided with a dramatic decline in net government debt as a share of GDP—from a peak of ~68% in 1995 to much lower levels by the decade’s end.

1994–95, federal program spending stood at C$123.2 billion.
2000-01 it stood at C$174.458 billion

So spending grew, even in real terms. It’s just that GDP grew much faster and it was driven entirely by export, mostly to the US.

Which makes reckless borrowing of the last decade particularly problematic in the climate of potential trade war with the US. And belt tightening might be forced on Ottawa for real,

I don't disagree, RetireEd, all sorts of stuff going on. (Except I don't agree that parents' holding kids' mortgages with family wealth is somehow wrong. I never got involved in such a situation, at either end, but I'm not going to disparage the process, people are free to do whatever (legally) they want, in my world.)

Anyway, all I know is that when houses go for sale on my street a For Sale sign goes up and sooner rather than later two arm's length parties freely and willingly agree on a sale-purchase price and the house changes hands. No-one is forced to do anything they don't want to. For pretty much my whole life now. I like that system.