Fairness for the Middle Class

The LPC party announced their “Fairness for the Middle Class” today. While I was hoping for a comprehensive platform, once again this is just a component of their plan, with the rest to follow. That makes it difficult to assess in its entirety, but here is what was announced today.

  • Scrapping income splitting
  • Reducing the second tax bracket from 22% to 20.5% which kicks in currently at $44,700
  • Introducing a fifth tax bracket of 33% for incomes over $200k (I assume the bracket is indexed)
  • Scrapping the taxable UCCB and instead enriching the nontaxable NCB/CCTB payments

While this is certainly different from Harper’s plan, there is certainly nothing novel or creative about this approach. In fact, this is pretty much what Canadian Economists have been calling for.

Things to remember: anyone with incomes over the $44.7k threshold benefit from that tax reduction so it is a broad based tax cut. The LPC says the tax cut will cost $3B and will be exactly offset by $3b raised from the new fifth tax bracket. This reminds us how little revenue is garnered by increasing tax rates of the wealthy. We need a 13.8% increase in the tax rate on the wealthy to pay for a 6.8% reduction in tax rates on the middle class. How realistic that estimate is, I will let Kevin Milligan determine that.

Consolidating child payments will help reduce administrative costs, increase tax simplicity, and make the system more progressive since the CCTB is means-tested vs. the UCCB system which is not. Also since the CCTB payment is nontaxable it means you keep what you get increasing transparency.

Overall, the plan will get a lot of nods from the economist community in Canada, but it is just one element of the plan. In his speech, Justin Trudeau noted that their plan for supporting child care and post secondary education is still to come. I had hoped this was their plan. I’d rather see income provided to parents to support their children rather than services. Services assume too much about the preferences of the parents and tend to fail more parents than they help. For example, the NDP child care plan will only support parents that chose a certain type of child care and does not help those parents that chose less formal arrangements or who need care for nonstandard times (e.g. night and weekends for those pesky shift workers) or who have the audacity to pick care from a big box provider. To the NDP, only some for profit child care is acceptable for their plan.

As a result, it is hard to be to be bully on the LPC right now since we don’t know the whole package, like whether there will be increased support for lower income CDNs. I guess we just have to wait. I am not a fan of the suspense, but it is what it is.