Government of Canada Announces Tax Cut to Strengthen the Middle Class

December 7, 2015 – Ottawa, Ontario – Department of Finance

The Government of Canada took an important step today to strengthen the middle class by proposing a tax cut that will benefit about 9 million Canadians each year.

Finance Minister Bill Morneau tabled in the House of Commons a Notice of Ways and Means Motion to reduce the 22-per-cent personal income tax rate to 20.5 per cent. Single individuals who benefit will see an average tax reduction of $330 every year, and couples who benefit will see an average tax reduction of $540 every year.

To help pay for this middle class tax cut, the Government is asking the wealthiest one per cent of Canadians to contribute a little more. The motion therefore includes provisions to create a new top personal income tax rate of 33 per cent for individual taxable incomes in excess of $200,000. The motion also contains provisions to return the Tax-Free Savings Account annual contribution limit to $5,500 from $10,000.

All of today’s proposed tax changes would take effect on January 1, 2016 and for subsequent taxation years.

Going forward, the Government will introduce proposals in the budget to create a new Canada Child Benefit—one simpler, tax-free, and more generous benefit targeted to families who need it most. Payments under the new Canada Child Benefit would begin in July 2016. The Government also intends to introduce legislative amendments, at an early opportunity, to repeal income splitting for families with children (not pension income splitting) for the 2016 and subsequent taxation years.   

Quotes

“Our Government made a commitment to invest in growing our economy, strengthening the middle class, and helping those working hard to join it. We committed to provide more direct help to those who need it. Today marks an important first step towards meeting these commitments.”

“We will continue to work together with Canadians to implement our platform for real change, which includes investing in our economy, our communities, and in Canadians themselves. That means transformative investments in infrastructure and a new plan for a strong middle class.”

- Bill Morneau, Minister of Finance

Quick Facts

  • The middle class tax cut will provide about $3.4 billion in annual tax relief to about 9 million Canadians.
  • Single individuals who benefit will see an average tax reduction of $330 every year, and couples who benefit will see an average tax reduction of $540 every year.