Tax Reduction: A Five Year Plan

With the deficit gone and substantial surpluses for the first time in three decades, the time is right for more tax cuts – cuts that are responsible, fair and permanent. The government’s Five-Year Tax Reduction Plan delivers. Budget 2000 will make the most important structural changes to the federal tax system in more than a decade. First, we are restoring full indexation of the personal income tax system and, second – for the first time in 12 years – a core tax rate is being lowered. The middle rate will fall from 26 to 23 per cent, starting with a two point reduction (to 24 per cent) in July 2000 – cutting taxes for some 9 million Canadians.

Tax Relief for Low- and Middle-Income Canadians

All Canadians – and low and middle-income Canadians in particular – will see substantial tax relief over the next five years. While our Plan will reduce personal income taxes by an average of at least 15 per cent for all Canadians, low- and middle-income Canadians will see cuts of at least 18 per cent. Families with children will benefit from tax cuts averaging at least 21 per cent.

Other Budget 2000 tax measures include:

• the elimination of the 5 per cent surtax

• raising the base amount Canadians can earn tax-free to $8,000

• raising Foreign Content Limits for Registered Retirement Savings Plans from 20 per cent to 30 per cent by 2001

Percentage Tax Reduction by 2004-05

Tax cuts for families

Families of four earning under about $35,000 are net beneficiaries as they get more in benefits than the taxes they owe.

Families with children in all regions of the country will benefit from a budget that takes us into the future with an education system second to none, secure social programs, and a Five-Year Tax Reduction Plan.

A Boost to the Canada Child Tax Benefit

Families with children will see an increase in the Canada Child Tax Benefit (CCTB) thanks to a boost of $2.5 billion. This means that families now receiving the CCTB will receive more generous benefits, and more middle-income families will qualify for the benefit.

Our objective is to raise the maximum benefit to $2,400 for a family’s first child by the year 2004. The benefit for a second child will be raised to $2,200. Over the next four years this will mean that low-income families will receive $6 billion, and modest- and middle-income families will receive $3 billion. These benefits – as well as personal income taxes – will also be fully indexed so that family incomes will not be eroded by inflation.

In all, changes to the CCTB will benefit nine out of ten Canadian children, or about 3.8 million families.

Cutting Taxes for Families

Under Budget 2000, families with children will see their personal income taxes fall by an average of at least 21 per cent, compared to other tax payers who will see their personal income taxes fall by an average of at least 15 per cent. For example, a one-earner family of four with an income of $40,000 will pay at least $1,623 less a year in net federal income taxes by the year 2004 – a reduction of 48 per cent! A typical two-earner family of four with an income of $60,000 will pay at least $1,546 less a year in net federal income taxes by the year 2004 – a reduction of 27 per cent.

The Canadian Forces received a vote of support in the 2000 budget. Consistently recognized amongst the world’s best trained and most competent, our soldiers have performed their duties with pride and excellence despite the budgetary restraint of recent years. CFB Kingston and the Royal Military College received welcome news from Defence Minister Art Eggleton. The Canadian Forces as a whole will receive an immediate infusion of $350 million and an additional $1.9 billion over the next three years.

The Department of National Defence will be focusing primarily on housing, health care, and pension plans for reservists. A portion of the additional funds will be invested in the leadership and training infrastructure, directly benefiting institutions such as the Royal Military College. The third component of the budgetary infusion will be directed towards upgrading equipment to ensure that Canadian troops have all the tools they need to perform their duties. While these funds will not be used to increase wages, Minister Eggleton has stated that wages will be increased to keep them in line with public service increases, which are currently being negotiated.