Big-spending parents of sports-loving children under six, this budget's for you.
You'll truly be able to say the Conservative government made you better off than you were before from a financial standpoint. For everyone else, it depends on your personal circumstances and how you slice the numbers.
To start, it must be noted that while the government offered several measures to ease the overall burden on taxpayers, it also raised personal income taxes in a way that will cause you to see a bit more taken off your paycheque in the second half of 2006.
By one estimate, an Ontario resident in the top tax bracket will pay about $70 more in income tax this year than he or she would have under the tax plan of the previous Liberal government.
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The explanation here is that the Conservatives have partially rolled back a Liberal measure from last year that cut the rate applied to the lowest tax bracket. Instead of paying 15 per cent tax on earnings up to $36,378, people will pay 15.5 per cent from July 1, 2006.
The budget offers lots of offsetting benefits, however. In fact, the government says that people earning $60,000 to $80,000 will save $562 this year from broad-based tax reductions -- that's all of $10.81 a week -- while those earning $80,000 to $100,000 would save $682, or $13.12 weekly.
Most important among the tax relief measures is a 1-per-cent reduction in the GST that kicks in July 1. This cut is borderline insignificant for daily out-of-pocket expenses, but it amounts to $300 on the purchase of a $30,000 car or $1,920 on the purchase of a $300,000 new home (a federal rebate on the GST paid on new homes is included here).
Another way taxes will fall under the Conservatives is through the July 1 introduction of the Canada Employment Credit. This tax credit is available to all employees -- not the self-employed -- and is designed to offer compensation for money spent on things such as home computers, uniforms and office supplies.
The Canada Employment Credit will start off at $500 for this year and increases to $1,000 next year. On a net basis, taxpayers might expect this credit to put cash in their pocket of about $155 in 2007.
Parents of children under six years old will benefit starting July 1 from the new Universal Child Care Benefit of $100 per child each month. This money will be taxable, of course, so the net benefit might typically be $70 for someone in a middle tax bracket.
The family theme for the Tory tax plan extends on into a $500 tax credit for the cost of enrolling children under 16 in athletic or fitness-related activities. This measure is being delayed until next year so the government can consult health and fitness experts to see what activities should be covered. Expect that $500 credit to be worth about $80 on your tax return.
Other tax-cutting measures include:
A tax credit for the purchase of monthly (or annual) transit passes that could produce a net benefit of roughly $150 a year;
A doubling of the amount of pension income that can be earned under the pension income credit to $2,000 from $1,000. This might save someone about $150 a year in taxes;
A $500 tax credit to help postsecondary students with their textbook costs that could be worth about $80 in cash per school year.
Combine all the Conservative tax measures, including the GST cut and the Canada Employment Credit, and it's a dead certainty that you'll pay less in taxes in the future. But if you measure your tax burden by how much of your pay you get to keep after taxes, a different picture emerges.
Numbers supplied by Tim Cestnick, managing director with the financial advice firm WaterStreet Group Inc., show that an Ontario resident in the top tax bracket would have paid $224 less in personal income taxes this year under the Liberal tax plan, which has now been superseded by the Conservative budget. Under the Conservative plan, tax savings for the same individual will be $154.
Next year, the Conservative plan would produce savings of $285 over the 2005 level, while the Liberal plan would have saved $411. However, Mr. Cestnick's numbers show that if the Canada Employment Credit is included here, the Conservative plan would allow for tax savings of $440.
From here, the tax savings in the budget depend a lot on your personal circumstances. Cutting taxes
Yesterday's budget was just the latest to bring down the level of federal income tax. The chart below shows Ottawa's annual take from different income levels since 2001.
| Federal | taxes | payable | ||||
| TAXABLE INCOME | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| $25,000 | 2,184.08 | 2,778.56 | 2,759.04 | 2,718.08 | 2,452.80 | 2,464.55 |
| 50,000 | 7,968.84 | 7,877.94 | 7,828.06 | 7,618.08 | 7,211.15 | 7,198.54 |
| 75,000 | 14,000.48 | 13,843.78 | 13,753.34 | 13,318.08 | 12,863.55 | 12,786.30 |
| 100,000 | 20,508.48 | 20,343.78 | 20,253.34 | 19,818.08 | 19,363.55 | 19,286.30 |
SOURCE: WALTER HARDER & ASSOCIATES
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