The first week of the federal election campaign saw each major party leader make their pocketbook pitches showing how they would put money back into the hands of voters.
What was lacking, however, was a full explanation of how the proposed tax cuts would play into the next government's larger budget plans.
Liberal Leader Mark Carney made his announcement on Sunday, the same day he triggered an April 28 election.
If elected, a Liberal government would lower income tax by one percentage on the lowest tax bracket. This, the party said, would save two-income families up to $825 a year. The party predicted this would cost about $6 billion.
Meanwhile, the following day, Conservative Leader Pierre Poilievre announced he would cut income tax for the lowest bracket by 2.25 percentage points, saving Canadians closer to $1,800 a year for a two-income family.
The Conservatives say the tax cut would be phased in and cost the government about $7 billion in each of the first two years and about $14 billion a year after that.
“They are pretty similar in terms of the policy; it’s just the scale of them,” said Brian Lewis, a former provincial chief economist who is now a senior fellow with the Munk School of Global Affairs and Public Policy and a professor at the University of Toronto.
“It would apply on any income that lands in the first tax bracket, so that means more to people who are low income, but everybody who's an income taxpayer is going to benefit from this. Even really high-income earners will get some benefit from it. Likewise, people who don't pay the income tax will get nothing in return for it.”
That’s an idea the New Democratic Party is trying to counter with its own proposal made Wednesday.
Speaking in Hamilton, Leader Jagmeet Singh announced he would increase the Basic Personal Amount (BBA) to $19,500, meaning those with an income less than that amount won’t have to pay federal income tax. The amount is currently set at just above $16,000.
Canadians who make less than $177,882 would also not pay taxes on that first $19,500 earned, resulting in about $505 in savings per year.
For high-income earners, their savings would be less, with their BPA threshold set at $13,500. Individuals making more than $235,632 annually would receive no benefit, the NDP said.
This, the party added, will cost about $10.4 billion, and would be paid for by cracking down on corporations who are non-compliant in their taxes and by keeping the Liberal capital gains tax increase, which was introduced, and later cancelled, by the government.
It would cost an additional $4.5 billion to remove GST from essentials, as the NDP is also proposing. This includes sales tax on home energy bills, cellphone and internet bills, children’s clothes and footwear, and prepared meals from the grocery store.
Singh said his party, if elected, would double the Canada Disability Benefit and increase the Guaranteed Income Supplement “to lift all seniors out of poverty.”
“Our plan is one to fight back, to give you relief,” Singh said. “In total, at a minimum, it's going to save $1,450 for families … and I think that's the right thing to do right now. It's going to help us weather the storm of this trade war and the potential uncertainty that comes with it.”
Lewis says he can see the attraction of cutting GST on necessities but that it won’t necessarily have a major impact on those who need it the most.
“Putting more money in the hands of the lowest income people, there's better policy than sort of picking and choosing which things you're not going to pay sales tax on,” he said, noting that an increase to the HST credit may have a larger impact. The credit is paid quarterly and is based on tax returns.
“I think we have to remember that when the GST was brought in, and when Ontario harmonized with it, the impact on low-income people was the policy design. It was (to) offset that with increased transfer payments to low-income people.”
Lisa Philipps, a tax professor at Osgood Law School at York University, feels similarly, saying that a GST cut isn’t inclusive to a particular income bracket.
“With the GST, if you are purchasing more expensive children’s clothing, there would be higher value to the GST reduction,” she said, adding there would also be a benefit for individuals with lower incomes, in addition to high-income earners.
Philipps added that an income-tax cut “makes lots of sense in terms of providing access tax savings for a wide group of people.”
Saying that, Lewis said the early NDP plan appears designed to benefit lower income people more than the Conservative or Liberal platform.
Is now the time for tax cuts?
Tax cuts are a common election promise, but for Kevin Page, a former parliamentary budget officer and president of the Institute of Fiscal Studies and Democracy, it “doesn’t show political courage.”
He said that from a political perspective, “it tells people that they recognize that there’s affordability issues,” but from a policy perspective, “it’s not good.”
“Canada is in these sort of perilous, pivotal times where we're dealing with an economy that's slowing thanks to a lot of global uncertainty and a trade war,” he said. “Why pile on the debt for this specific issue at this time? We know we're going to have to deal with this trade war, trade shock. Maybe we need something that is more targeted.”
It’s a question Lewis is also asking.
“Is this the best way to use the money?” he said. “I get the policy and politics behind the income tax cut, but I don't think people were jumping up and down saying that tax cuts are the most important thing to me right now.”
Carney has pitched his smaller income tax cut as different from Poilievre’s because it’s more “balanced” compared to the “simple” Conservative plan, likely an acknowledgment of the financial pressure a tax cut could have on the government's finances.
Meanwhile, Poilievre said he would pay for the changes by cutting bureaucracy, consultants and foreign aid. He also promised to “bring in a dollar-for-dollar law” requiring ministers to find savings to match new spending.
But Lewis and Page said it’s not as easy as that, and that political parties may want to consider keeping their “financial powder dry” to help those impacted by impending tariffs.
On Wednesday, U.S. President Donald Trump announced a 25 per cent tariff on foreign cars and car parts, and more levies could be coming next week.
“We're running this deficit economy. We have the sense it's going to get slower and slower because of the trade war, that being more targeted is probably better than a general tax cut, which raises longer term fiscal sustainability issues potentially,” Page said, noting that it appears as though the Conservatives want to “deficit finance” their plan and find ways to save at a later date.
Carney, meanwhile, has committed to splitting the books in two — balancing the operating budget in three years while running a deficit on capital spending for things like public transit, energy, and infrastructure. It’s an idea that both Lewis and Page say could make sense, although they are interested to see how it’s implemented if the Liberals are elected.
Using Public Accounts data from last year, Page estimates the capital spending deficit could be about $30 billion after three years, which would be “small” and less than a percentage of Canada’s GDP.
In the last quarter of 2024, Canada’s deficit was about 2.2 per cent of GDP.
“I think it's worth actually thinking that there's more nuance to government finance than just 'There's a number,'” Lewis said of Carney’s plan.
“I think they're just saying that there's different reasons for going into deficit, and some are more acceptable than others from a financial perspective and from an economic perspective. And I actually think that's a good thing.”
More information is expected to be released in each party’s costed platform sometime later in the election campaign.
