Budget Plan, Chapter 4: Five-Year Tax Reduction Plan

Finance Canada
Budget 2000 - Budget Plan, Chapter 4: Five-Year Tax Reduction Plan - 4
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Examples of Tax Reductions for Typical Individuals and Families by 2004

Single Parent With One Child and an Income of $30,000: Tax Reduction by 2004

	Tax reduction/ benefits increase	Federal tax/benefits


	(dollars)
Pre-2000 budget
Tax		1,882
Canada Child Tax Benefit (CCTB)		1,415
Goods and services tax (GST) credit		499
Total net federal tax (tax minus CCTB and GST credit)		-32
Five-Year Tax Reduction Plan
Reduction in tax	274
Increase in CCTB	663
Increase in GST credit	49
Total net federal tax reduction	986
Post-Plan net federal tax (tax minus CCTB and GST credit)		-1,018
First full-year impact (2001)
Reduction in tax	72
Increase in CCTB	281
Increase in GST credit	20
Total net federal tax reduction	373

The information provided above compares the benefits that would be received by a single parent, with one child, earning $30,000 in 2004 with and without the tax reductions provided by the Plan.
Without taking into account the tax reductions proposed, this individual would have received $32 in total net benefits in 2004.
By 2004, this single parent will receive $1,018 in total benefits, an increase of $986 in benefits.
In 2001 alone, this single parent’s net benefits will increase by $373.

Single Individual With an Income of $35,000: Tax Reduction by 2004

	Tax reduction/ benefits increase	Federal tax/benefits


	(dollars)
Pre-2000 budget
Total net federal tax		4,875
Five-Year Tax Reduction Plan
Total net federal tax reduction	635
Total net federal tax reduction (per cent)	13.0
Post-Plan budget net federal tax		4,240
First full-year impact (2001)
Total net federal tax reduction	214
Total net federal tax reduction (per cent)	4.4

The information provided above compares taxes that would be paid by a single individual earning $35,000 in 2004 with and without tax reductions provided by the Plan.
Without taking into account the tax reductions proposed, this individual would pay $4,875 in net federal personal income tax in 2004.
By 2004, this individual will pay $4,240 in net federal personal income tax, a reduction of $635 or 13.0 per cent.
In 2001 alone, this individual’s federal taxes will be reduced by $214.

One-Earner Family of Four and an Income of $40,000: Tax Reduction by 2004

	Tax reduction/ benefits increase	Federal tax/benefits


	(dollars)
Pre-2000 budget
Tax		5,100
Canada Child Tax Benefit (CCTB)		1,733
Goods and services tax (GST) credit		0
Total net federal tax (tax minus CCTB)		3,367
Five-Year Tax Reduction Plan
Reduction in tax	911
Increase in CCTB	637
Increase in GST credit	76
Total net federal tax reduction	1,623
Total net federal tax reduction (per cent)	48.2
Post-Plan budget net federal tax (tax minus CCTB and GST credit)		1,744
First full-year impact (2001)
Reduction in tax	347
Increase in CCTB	235
Increase in GST credit	0
Total net federal tax reduction	582
Total net federal tax reduction (per cent)	17.3

The information provided above compares taxes that would be paid by a one-earner family of four earning $40,000 in 2004 with and without tax reductions provided by the Plan.
Without taking into account the tax reductions proposed, this family would pay $3,367 in net federal personal income tax in 2004.
By 2004, this family will pay $1,744 in net federal personal income tax, a reduction of $1,623 or 48.2 per cent.
In 2001 alone, this family’s net federal taxes will be reduced by $582.

Two-Earner Family of Four and an Income of $60,000: Tax Reduction by 2004

	Tax reduction/ benefits increase	Federal tax/benefits


	(dollars)
Pre-2000 budget
Tax		6,656
Canada Child Tax Benefit (CCTB)		845
Goods and services tax (GST) credit		0
Total net federal tax (tax minus CCTB)		5,811
Five-Year Tax Reduction Plan
Reduction in tax	812
Increase in CCTB	734
Increase in GST credit	0
Total net federal tax reduction	1,546
Total net federal tax reduction (per cent)	26.6
Post-Plan budget net federal tax (tax minus CCTB and GST credit)		4,265
First full-year impact (2001)
Reduction in tax	273
Increase in CCTB	228
Increase in GST credit	0
Total net federal tax reduction	501
Total net federal tax reduction (per cent)	8.6

The information provided above compares taxes that would be paid by a two-earner family of four earning $60,000 in 2004 with and without tax reductions provided by the Plan.
Without taking into account the tax reduction proposed, this family would pay $5,811 in net federal personal income tax in 2004.
By 2004, this family will pay $4,265 in net federal personal income tax, a reduction of $1,546 or 26.6 per cent.
In 2001 alone, this family’s net federal taxes will be reduced by $501.

Typical One-Earner Family of Four
Impacts of Proposed Five-Year Tax Reduction Plan by 2004

Total income	Federal tax pre-2000 budget	Increase personal and spousal amounts	Increase 2nd and 3rd brackets	Reduce the middle rate	Eliminate surtax	Enhance Canada Child Tax Benefit	Other indexation	Total relief²	Total relief as a % of federal tax³	Federal tax post-Plan

		Proposed tax reduction measures by 2004¹

$	$	$	$	$	$	$	$	$	$/%	$
15,000	-4,398	-173	0	0	0	-869	-55	-1,097	-1,097	-5,495
20,000	-3,601	-274	0	0	0	-869	-55	-1,198	-1,198	-4,799
25,000	-2,000	-274	0	0	0	-1,268	-55	-1,597	-1,597	-3,597
30,000	-37	-274	-37	0	0	-1,268	-172	-1,751	-1,751	-1,788
35,000	1,710	-274	-487	0	0	-594	-172	-1,526	-89.3	183
40,000	3,367	-274	-487	-150	0	-637	-76	-1,623	-48.2	1,744
50,000	6,467	-274	-487	-450	0	-723	0	-1,934	-29.9	4,534
60,000	9,592	-274	-512	-750	0	-809	0	-2,344	-24.4	7,248
75,000	14,783	-288	-852	-1,103	-2	-920	0	-3,165	-21.4	11,619
100,000	22,396	-288	-852	-1,103	-364	0	0	-2,607	-11.6	19,789
125,000	30,008	-288	-852	-1,103	-727	0	0	-2,970	-9.9	27,039

¹ In calculating the amount of the tax reduction by 2004, the following assumptions were made: annual inflation factor of 1.8 per cent on average is used over the five-year period; personal amount: $8,000; spousal/equivalent-to-spouse amount: $6,800; middle tax bracket threshold: $35,000; upper tax bracket threshold: $70,000; middle tax rate: 23 per cent; 5-per-cent surtax: eliminated; the Canada Child Tax Benefit base benefit increased by $70 in 2000 (including indexation) then indexed; the rate at which benefits decline with increases in income lowered to 2.07 per cent for a one-child family and 4.14 per cent for a family with two or more children; the threshold at which the base benefit starts to be reduced: $35,000; the National Child Benefit supplement increased by $200 per child by July 2001 (including indexation).
²Negative values indicate a reduction in net tax paid to the federal government.
³Where individuals and families receive more in federal refundable credits (CCTB, GST credit) than they pay in federal income tax, the federal income tax reductions are indicated in bold and represent the increase in the net benefits they receive from the tax and transfer system. Percentages are not meaningful so the dollar amounts are repeated.

Typical Two-Earner Family of Four
Impacts of Proposed Five-Year Tax Reduction Plan by 2004

		Proposed tax reduction measures by 2004¹

Total income	Federal tax pre-2000 budget	Increase personal and spousal amounts	Increase 2nd and 3rd brackets	Reduce the middle rate	Eliminate surtax	Enhance Canada Child Tax Benefit	Other indexation	Total relief²	Total relief as a % of federal tax³	Federal tax post-Plan

$	$	$	$	$	$	$	$	$	$/%	$
15,000	-4,571	0	0	0	0	-869	-55	-924	-924	-5,495
20,000	-4,503	-68	0	0	0	-869	-55	-992	-992	-5,495
25,000	-3,650	-287	0	0	0	-850	-55	-1,192	-1,192	-4,842
30,000	-2,366	-287	0	0	0	-1,230	-55	-1,572	-1,572	-3,938
35,000	-576	-148	0	0	0	-1,291	-172	-1,611	-1,611	-2,186
40,000	820	-295	0	0	0	-777	-172	-1,244	-1,244	-424
50,000	3,179	-295	-37	0	0	-648	0	-980	-30.8	2,199
60,000	5,811	-295	-487	-30	0	-734	0	-1,546	-26.6	4,265
75,000	9,822	-295	-487	-300	0	-863	0	-1,945	-19.8	7,877
100,000	15,794	-295	-863	-750	0	0	0	-1,909	-12.1	13,885
125,000	22,904	-303	-1,339	-1,358	-60	0	0	-3,059	-13.4	19,845

¹In calculating the amount of the tax reduction by 2004, the following assumptions were made: annual inflation factor of 1.8 per cent on average is used over the five-year period; personal amount: $8,000; spousal/equivalent-to-spouse amount: $6,800; middle tax bracket threshold: $35,000; upper tax bracket threshold: $70,000; middle tax rate: 23 per cent; 5-per-cent surtax: eliminated; the Canada Child Tax Benefit base benefit increased by $70 in 2000 (including indexation) then indexed; the rate at which benefits decline with increases in income lowered to 2.07 per cent for a one-child family and 4.14 per cent for a family with two or more children; the threshold at which the base benefit starts to be reduced: $35,000; the National Child Benefit supplement increased by $200 per child by July 2001 (including indexation).
²Negative values indicate a reduction in net tax paid to the federal government.
³ Where individuals and families receive more in federal refundable credits (CCTB, GST credit) than they pay in federal income tax, the federal income tax reductions are indicated in bold and represent the increase in the net benefits they receive from the tax and transfer system. Percentages are not meaningful so the dollar amounts are repeated.

Typical Single Individual
Impacts of Proposed Five-Year Tax Reduction Plan by 2004

	Proposed tax reduction measures by 2004¹

Total income	Federal tax pre- 2000 budget	Increase personal and spousal amounts	Increase 2nd and 3rd brackets	Reduce the middle rate	Eliminate surtax	Enhance Canada Child Tax Benefit	Other indexation	Total relief²	Total relief as a % of federal tax³	Federal tax post-Plan

$	$	$	$	$	$	$	$	$	$/%	$
10,000	137	-148	0	0	0	0	-6	-154	-154	-18
15,000	899	-148	0	0	0	0	-27	-175	-19.5	724
20,000	1,695	-148	0	0	0	0	-27	-175	-10.3	1,520
25,000	2,492	-148	0	0	0	0	-27	-175	-7.0	2,317
30,000	3,529	-148	-37	0	0	0	-144	-329	-9.3	3,200
35,000	4,875	-148	-487	0	0	0	0	-635	-13.0	4,241
40,000	6,129	-148	-487	-150	0	0	0	-785	-12.8	5,345
50,000	8,729	-148	-487	-450	0	0	0	-1,085	-12.4	7,645
60,000	11,354	-148	-512	-750	0	0	0	-1,409	-12.4	9,945
75,000	15,864	-155	-852	-1,103	-60	0	0	-2,169	-13.7	13,695
100,000	23,477	-155	-852	-1,103	-422	0	0	-2,532	-10.8	20,945
125,000	31,089	-155	-852	-1,103	-785	0	0	-2,894	-9.3	28,195

¹In calculating the amount of the tax reduction by 2004, the following assumptions were made: annual inflation factor of 1.8 per cent on average is used over the five-year period; personal amount: $8,000; spousal/equivalent-to-spouse amount: $6,800; middle tax bracket threshold: $35,000; upper tax bracket threshold: $70,000; middle tax rate: 23 per cent; 5-per-cent surtax: eliminated. ²Negative values indicate a reduction in net tax paid to the federal government. ³ Where individuals and families receive more in federal refundable credits (GST credit) than they pay in federal income tax, the federal income tax reductions are indicated in bold and represent the increase in the net benefits they receive from the tax and transfer system. Percentages are not meaningful so the dollar amounts are repeated.

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