• Last stage of 2000 Personal and Corporate Tax cuts to be implemented
• 3 per cent Federal Personal Income Tax Indexation higher than expected
• No Payroll Tax increase for first time in 12 years
• Provinces Hold the line on Income Taxes - no substantial tax cuts

Charts

OTTAWA: The Canadian Taxpayers Federation (CTF) today applauded the Paul Martin government for implementing the last phase of its five-year tax reduction plan. Personal income taxes and corporate taxes have declined by $47 billion. The general corporate tax rate will decline to 21 per cent from 23 per cent on January 1st, encouraging further economic growth, stemming from the 200 Federal budget. Taxpayers will ring in 2004 with their taxes inching downward.

Federal Personal Income Tax Savings

Federal personal income tax (PIT) reductions for 2004 are not the result of new lower tax rates, but are due to a PIT indexation factor of three per cent and higher tax thresholds. "A three per cent indexation factor exceeds inflation, and increases the Basic Personal Exemption (BPE) to $8,012. Unfortunately it's still shy of the CTF's 2004 benchmark for raising the BPE to $15,000 over five years," said CTF research director Bruce Winchester. In addition to indexing tax credits - as outlined in the 2000 tax cuts plan - the Martin government has increased the first income tax threshold to $35,000, the second to $70,000 and the third to $113,804, which will result in modest tax savings for 2004.

Payroll Tax Savings

Reductions in Employment Insurance (EI) taxes will, in 2004, outstrip CPP increases by a modest $17 for those paying the maximum. In 2004, total payroll taxes will decline for the first time in 12 years. "Lowering the EI tax rate is welcome relief, but Ottawa still collects more EI than it pays out - amassing, at last count, a whopping $45 billion surplus. Prime Minister Martin once called payroll taxes a cancer on job creation - further EI tax cuts should be a priority for his government," said Winchester.

Provincial Tax Savings

Very few provinces will be lowering taxes in 2004. A planned across-the-board ten per cent income tax rate reduction in Nova Scotia will result in that province having the lowest personal income taxes of the four Atlantic Provinces. In Saskatchewan, full indexation of the tax brackets for inflation takes effect in 2004, leaving only: Manitoba, Nova Scotia, Newfoundland and Prince Edward Island perpetuating bracket creep. "Due to lack of indexation, some taxpayers might see much more modest tax savings this year than others," said Winchester.

"Any small gains made this year are threatened by growing federal and provincial spending. Governments should resolve to put their spending on a diet in the New Year," concluded Winchester.

Charts and Calculations available:

The CTF has prepared three charts available by following by clicking here, or by request. The first chart shows total personal income tax burden for select income scenarios 2003 versus 2004 tax years - including tax savings; the second shows payroll taxes paid by employee and employer at $39,000 of income between 1993 and 2004; and the third shows a graph of employer, employee and total payroll taxes on $39,000 of income between 1993 and 2004.