Trudeau Plans Higher Taxes on Rich Canadians in Vote Gambit

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Liberal Party Leader Justin Trudeau
Justin Trudeau, leader of the Liberal Party of Canada, proposed creating a new tax rate of 33 percent for people earning more than C$200,000 a year, up from today’s 29 percent, while lowering the tax rate for people earning between C$44,701 and C$89,401 a year to 20.5 percent from 22 percent. Photographer: Jim Watson/AFP/Getty Images

Liberal Party Leader Justin Trudeau, preparing for elections this year on a platform of combating income inequality, said he’d raise taxes on the highest-earning Canadians while cutting them for everyone else.

Trudeau is firming up economic measures in a bid to replace Prime Minister Stephen Harper and his ruling Conservative Party. The plan unveiled Monday in a Gatineau, Quebec restaurant marks the biggest appearance for redistribution in a Canadian election campaign in at least a generation.

“Under Stephen Harper, middle class Canadians have had to work harder just to make ends meet,” Trudeau said. “We have a plan for fairness.”

To stop Harper from winning a fourth mandate in an election scheduled for October, Trudeau is focusing on class and income stagnation in a bid to bring more left-leaning voters to his side. Building an agenda around narrowing the income divide also allows him to justify raising revenue from high-income earners.

Harper’s broad reductions including expanded tax-free savings accounts and income splitting for families are damaging because too much of the benefits go to the rich, Trudeau has said, adding the C$3 billion ($2.5 billion) cost of his planned tax cuts would be fully offset by increases.

‘Somewhat Unusual’

The Liberal plan represents a “tax break in the pockets of those who need it most,” Trudeau said. “We’ll pay for it by asking Canadians who have done well to do a little more.”

The measures would push the marginal tax rate for high income earners above 50 percent in some regions, including Ontario and Quebec, when combined with provincial rates.

“Seeing rates in excess of 50 percent is somewhat unusual” globally, said Albert Baker, global tax policy leader at Deloitte Canada in Toronto.

Trudeau proposed creating a new tax rate of 33 percent for people earning more than C$200,000 a year, up from today’s 29 percent, while lowering the tax rate for people earning between C$44,701 and C$89,401 a year to 20.5 percent from 22 percent. Currently, combined top federal and provincial marginal tax rates range between 39 percent in Alberta to 54.75 percent in New Brunswick, according to KPMG.

Top marginal income-tax rates in Quebec and Ontario are just below 50 percent.

‘Top Talent’

Trudeau’s proposals are at odds with recommendations from some experts who say government should cut taxes on high earners to attract productive workers. Top marginal tax rates in the U.S. for example kick in at much higher incomes than in Canada, said Deloitte’s Baker.

“Immigration of top talent and retaining top talent are important to us,” Baker said by telephone. The Liberal proposal “would make Canada uncompetitive in this area.”

Trudeau also unveiled proposed changes to the child benefit program that would boost payments for households with combined earnings of less than C$150,000, while curbing or eliminating benefits for those who earn more.

The new plan would replace the universal child care benefit, and after canceling Harper’s income splitting measures, the net cost of the revamped program would be C$2 billion.

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