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Archived - Tax Relief for Canadians

With an improving fiscal situation over recent years, the government has been able to offer targeted tax relief where the need was greatest and the social and economic payoff was the largest -- for working parents with low incomes, charities, students and the disabled.

Now that the budget is balanced, and we are beginning to repay the debt borrowed in private markets, the government is in a position to do even more. The 1998 budget continues the policy of providing targeted tax relief and also begins the process of general tax relief, starting with those who need it most -- low- and middle-income Canadians. Over the next three years, $7 billion in tax relief will be provided to those Canadians.

Beginning General Tax Relief

The 1998 budget proposes two new measures that will provide general income tax relief for low- and middle-income Canadians. Taken together, these measures will provide close to $1.4 billion in tax relief to 14 million low- and middle-income Canadians by 1999-2000 -- 90 per cent of all taxpayers.

Increasing Tax-Free Income

• Beginning July 1, 1998, the amount of income that low-income Canadians can receive on a tax-free basis will be increased by $500.
• This measure will take 400,000 Canadians off the tax rolls and reduce taxes for an additional 4.6 million Canadians.

Eliminating the General Surtax for Most Canadians

• Beginning July 1, 1998, the 3-per-cent general surtax will be eliminated for Canadians with incomes up to about $50,000.
• As a result, 13 million taxpayers will no longer pay any federal surtax. Another one million Canadians will see a significant reduction in their surtax liability.

Providing Progressive Tax Relief

These measures provide a very progressive distribution of tax relief. It recognizes the need to begin lowering taxes for those who need it most -- Canadians with low- and middle-incomes.

As a result of these two measures, single people earning $30,000 a year will see their tax burden reduced by 3.0 per cent, while singles earning $50,000 a year will receive a 2.4-per-cent tax reduction. For families, taxes will fall by 3.3 per cent at $50,000. A family with an annual income of $30,000 will get a 31-per-cent reduction in taxes with its total federal income taxes falling to about $300 -- or about 1 per cent of income.

Continuing Targeted Tax Relief

Enriching the Canada Child Tax Benefit

• To help build toward a National Child Benefit System, the 1997 budget allocated $850 million to create an enriched and simplified Canada Child Tax Benefit.
• To further support children in low-income families across Canada, the 1998 budget proposes to increase the Canada Child Tax Benefit by an additional $850 million. This enrichment will be made in two steps: an increase of $425 million annually beginning in July 1999, and a further increase of $425 million annually commencing in July 2000.
• The federal government will announce details of the enrichment after discussions with provincial and territorial partners and Canadians.

Increasing the Child Care Expense Deduction

To help working Canadians with children, the 1998 budget proposes to increase the limit on the child care expense deduction.

• Beginning in 1998, the limits for the child care expense deduction will increase from $5,000 to $7,000 for children under age 7, and from $3,000 to $4,000 for children between the ages of 7 and 16. This measure will benefit some 65,000 Canadian families with children.

Assisting Self-Employed Canadians with Health and Dental Premiums

• To improve equity in the treatment of self-employed Canadians, owner-operators of businesses will now be able to deduct health and dental premiums against their business income.

Helping Individuals Care for Family Members

Many Canadians provide care and support for family members who are elderly or disabled. Currently, caregivers receive tax assistance through the infirm dependant credit. The 1998 budget proposes:

• a new caregiver credit that will reduce federal tax up to $400 for Canadians caring for an elderly parent or a family member with disabilities. This measure will increase or extend tax assistance to some 450,000 caregivers; and
• a tax exemption for caregivers, related to the goods and services tax and the harmonized sales tax, for expenses incurred from the service of providing temporary care to a person who, by reason of infirmity or disability, has limited means of self-care.

Improving Access to Knowledge and Skills

The 1998 budget proposes a Canadian Opportunities Strategy to help expand access to knowledge and skills Canadians will need for jobs and higher standards of living.
Tax measures include:

• tax relief for interest payments on student loans;
• tax-free registered retirement savings plan (RRSP) withdrawals for lifelong learning; and
• an education credit and child care expense deduction for part-time students.

Increasing Support for Emergency Service Volunteers

• To support the thousands of Canadian volunteers who provide essential emergency services, the tax-free allowance for volunteer firefighters will be doubled -- from $500 to $1,000.
• This allowance will also be extended to all other emergency service volunteers, effective January 1, 1998.

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