Millionaires and billionaires would get maximum payout in Bonnie Crombie tax plan
Feeling like a 1990s throwback, Crombie's tax plan gives nothing for people earning under $50,000 and maximum benefit to those already those living large.
Today’s top issue may be high costs for people struggling to pay rent and buy food, but Ontario Liberal leader Bonnie Crombie is betting a return to the days of tax cuts for the rich will revive her party’s fortunes.
The Ontario Liberal leader on Monday pledged a new income tax bracket from $51,466 to $75,000 with a marginal Ontario tax rate of 7.15 per cent. The current tax rate for incomes in this range is 9.15 per cent.
Bonnie Crombie’s plan would deliver $1,282 to a family with two high incomes, but a family with two low incomes would receive nothing, based on Data Shows calculations using Ontario tax tables and the Ontario Liberals’ data.
For those with taxable incomes at or below $51,446, the bottom of the new bracket, there is no benefit. Those earning at or above the top of her proposed new bracket, $75,000, would get $471 from the reduction in the tax rate.
But because her proposal also pushes up the income levels at which Ontario’s two income surtaxes kick in, Bonnie Crombie’s proposal adds two additional tax cuts for those with higher incomes.
A person with a $90,000 taxable income would get $565. Someone with a taxable income of $150,000 up to $1,000,000 and higher would get $641 because the income thresholds at which the surtax applies are increased by her plan.
Taxable income is the amount of income after deductions, such as RRSP contributions. A person paid $85,000 a year who contributes $10,000 to an RRSP has a taxable income of $75,000.
Crombie’s tax cut would spend $268 million a year on those with taxable incomes over $150,000, according to an analysis using Statistics Canada’s Social Policy Simulation Database and Model.
How Ontario’s income surtaxes work
In addition to the usual system of tax brackets each with an associated tax rate, Ontario has two income surtaxes. A 20 per cent surtax applies on provincial income tax over $5,554. A 36 per cent surtax applies on income tax over $7,108.
Currently, a taxable income of $83,752 would typically pay $5,554 in Ontario tax. Amounts higher would be subject to the 20 per cent surtax. An income of $100,735 would typically pay $7,108 in Ontario income tax; higher amounts would be subject to the 36 per cent surtax.
Crombie’s proposal raises the taxable income at which each surtax kicks in, boosting tax savings for higher income earners.
News media got spun about tax math
Bonnie Crombie pitched her proposal as a middle class tax cut and her press release does not mention that her proposed tax rate change increases surtax thresholds.
Early news reports about Bonnie Crombie’s proposal, and even an analysis by the Canadian Taxpayers Federation, missed the impact of her proposal on Ontario’s income surtaxes.
Many news reports also did not note the tax cut benefit flows to everyone earning more than Bonnie Crombie’s proposed new brackets, right up to Ontario’s very highest income earner.
CBC did pick on on this feature, but reported a party spokesman who said those earning “just more” than $75,000 would also benefit. In fact, those earning substantially more would benefit.
Your contribution of $30 or $50 to Data Shows will put this post in the social media feeds of thousands of Ontarians whose only knowledge of Bonnie Crombie tax plan is from incomplete news reports.