Evidence of meeting #13 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was rate.
A recording is available from Parliament.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Then we have, if I read it correctly, three tax brackets.
General Director, Tax Policy Branch, Department of Finance
We have the 15%, the 20.5%, the 26%, the 29%, and the proposed 33%.
Conservative
General Director, Tax Policy Branch, Department of Finance
Yes, I do.
In number of individuals, or shared?
Conservative
General Director, Tax Policy Branch, Department of Finance
Okay, the number of Canadians. In the first bracket, about 8.7 million. In the second bracket, about 7.1 million. In the third bracket, about 1.8 million. In the fourth bracket, which is between about $140,000 and $200,000, about 0.5 million. And over $200,000, it's about 0.4 million.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Just to go back, we had the number of $3.4 billion relative to what this will cost Treasury. At one point in time, it was deemed this would be a revenue-neutral tax change. Can you confirm for me the latest estimate to increase that upper level in aggregate terms on an annual basis? How much extra are you anticipating will be brought in, in 2016?
General Director, Tax Policy Branch, Department of Finance
In 2016-17 we expect that the revenues coming from the new 33% tax rate will be about $2 billion. In the same year we expect the reduction in the second bracket will cost about $3.4 billion, so that there's a net cost of about $1.4 billion.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Going forward, what are your estimates? Does that $1.4 billion start to increase? Where do you project that?
General Director, Tax Policy Branch, Department of Finance
It is projected to go up to about $1.7 billion by 2020-21.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
Have you made any calculations? I know you mentioned earlier about elasticity. A lot was made recently about a high taxpayer, a well-known Liberal in Calgary named Murray Edwards, who has relocated to London allegedly for tax reasons.
Have you made any calculations on the next five years on what this...and combined with that, your earlier comments about the now-exceeding 50% rate when you combine provincial and federal taxes for the higher level? Have you done any calculations? Are you projecting that elasticity might increase?
General Director, Tax Policy Branch, Department of Finance
We're confident the 0.4% elasticity, from our point of view, is the appropriate measure. The decision to relocate is often seen...it's obviously influenced by the marginal rate, but it's also because it's a discrete decision. It's also influenced by the average tax rate you're going to face, along with the cost of other benefits like health and all that.
Just to give you an idea, if you have $300,000 of income, following this new 33% rate, your average tax rate will increase by about 1.1%, assuming all your income is ordinary income. That's different from the marginal rate of 4%. It's 1%. I want to highlight the fact that we're not saying these individuals with higher income would only face on average a 4 percentage point higher tax rate. I mean, it's gradual. It's a progressive system.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
I need to clarify, there were a lot of numbers thrown around on TFSAs, but did I hear you correctly that you said 11 million Canadians currently have opened TFSAs?
General Director, Tax Policy Branch, Department of Finance
I have some numbers. Based on 2013, it's 10.7 million.
Conservative
Ron Liepert Conservative Calgary Signal Hill, AB
That's the number.
Did I hear you say that 60% had maximized their...?
General Director, Tax Policy Branch, Department of Finance
Two million out of these 10.7, or almost 11 million.
Conservative
General Director, Tax Policy Branch, Department of Finance
The 60% I used was that 60% of these maximizers have incomes below $60,000.
Liberal
The Chair Liberal Wayne Easter
I'll have to stop you there Ron. You're substantially over time.
Mr. Grewal, and Mr. Ouellette, I think you wanted to split your time, but we will have ample time if you want to go to a complete round.
Mr. Grewal first. If you want to take the five, we have until 12:30.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair, and thank you for your testimony this morning.
I have a hypothetical situation for you, and hopefully you'll be able to answer it.
Assuming you're a family that's going to benefit the maximum from the middle-income tax cut, and in that corresponding tax bracket, let's say you made $60,000. You have two children under the age of six, and you're also going to benefit from the Canada child benefit. How much more money are you going to get because of Bill C-2?
General Director, Tax Policy Branch, Department of Finance
There's a bit of calculation involved in this question.
General Director, Tax Policy Branch, Department of Finance
I don't want to guess here. What I can tell you is if it's a two-earner family, and they both earn $60,000—
General Director, Tax Policy Branch, Department of Finance
The household income is $60,000? If it's a one-earner family at $60,000? It's going to depend on whether it's a one-earner or a two-earner family.