Don’t worry Justin Trudeau and the Liberals will probably NOT be raising your taxes.
Dear people who think they’re a part of the 1% and are going to “suffer” from the proposed new tax regime that the Liberals talked about during their campaigning, you probably don’t need to worry as much as you think!
First of all let me say, I saw an unbelievable amount of “end of days” comments after the election. Everything from terrorists are now going to invade us to how much more in taxes Albertans are going to be paying. I can’t really dispute the terrorism thing with cold hard facts, other than nothing has happened so far! Now with us heading into winter I think we’re probably safe until Spring 2016. On the other hand, the tax issue I can definitely shed some light on.
First let’s take a look what it takes to become part of the 1% in Canada. In 2011 the minimum income required to be in the top 1% of Canadian earners was $191,000. The average however was $381,300 which means that it’s a pretty steep climb after that minimum entry.
In a slightly more recent study from 2012 the top 1% minimum income was said to be $215,700 per year. That’s quite the climb from the previous year. One could easily assume that this total has continued to climb year after year especially since there are some who say 2012 was one of the worse years for the rich getting richer so surely they have climbed out of that despair. At only an increase of 5%(which is a randomly chosen % if you’re wondering) each year that minimum income is about $250,000 per year.
So now that you probably realized you jumped the gun on calling yourself part of the top 1% here are the proposed income tax changes that were talked about during this most recent election:
- The second lowest income bracket from $44,701 to $89,401 will be decreased to 20.5% from 22%. A savings of up to $670.50 if you earn at least $89,401/year.
- There will be a new income bracket created for people earning $200,000 or more. This will increase to 33% from the current highest bracket of 29%. This is an extra $40 dollars on every $1000 you earn over $200,000.
So basically anyone who earns over $44,701 and up to $216,762.5 saves more money this year than they did last year. In short, the Liberals will not be raising your taxes. $216,762.50 is where the diminishing returns begin for this bracket. You’ll start actually paying more in taxes when you factor the savings through the second tax bracket only after this point.
But never fear, for those of you making more than $216,762.50 per year, there’s still hope to avoid these extra taxes. The easiest one, and I’m sure you’re already aware of it since you’re quite financially savvy, is RRSP contributions. In 2015 you can contribute up to $24,930 into your RRSP. This will effectively reduce your taxable income by that contribution. So essentially if you earn $241,692.50 per year and contribute the maximum amount to your RRSP you’re still safe and will see the liberals will not be raising your taxes.