The taxman cometh; the taxman taketh away.
The Canadian Taxpayers Federation (CTF), has just released its latest calculations on the taxes we all will be paying in 2011 and their conclusions show that nearly all of us will be paying more. While the average increase will be around 2%, low income earners are going to wind up being the hardest hit with increases of 2.5% or 3%. Why? Apparently payroll taxes make up the greatest portion of these hikes in the form of higher employment insurance and Canada Pension Plan premiums. Proportionally, payroll taxes make up a larger share of the wages the further down the pay scale you go. Unfortunately, this means low-income earners end up suffering the most from these increases. They will have to stretch every dollar further.
In studying the CTF report, one can see that Ontario will be the hardest hit. For a single earner making $15,000 per year, they will see their taxes increase 9.8%. This is a loss of income of $119 per year. As one scans up the various income brackets, the percentages go down even though the dollar amounts go up. Remember that the proportion of the tax increase to the income determines the percentage. A single earner making $45,000 a year sees a $390 increase but that is only a 3.7% increase in the taxes.
The CTF news release states
“Nearly every working Canadian will be paying more in income and payroll taxes in 2011,” said Derek Fildebrandt, CTF national research director. “In every province, family and income scenario, our research finds that the governments take from inflation-adjusted incomes will increase, in some case substantially.”
“In previous years, there has almost always been winners and losers depending on income levels, family scenarios and what province one lives in. This year everyone loses, although some more than others,” said Fildebrandt.
While virtually every worker in Canada will pay more due to federal payroll tax increases, taxpayers in provinces with inflation rates above the national average will see a disproportionate increase in their effective tax bill, due to indexation gaps.
“Without a doubt, Ontarians are the biggest losers when it comes to tax changes on January 1st with an average 4.3 per cent increase in the scenarios we examined.”
[sigh] I guess this means my Mocha Cappuccino Latte is going to go from a Grande to a Tall next year. And I so love that biscotti. Okay, maybe only once a week as a treat. Hmmm, maybe I need to do a little financial planning in the new year. Now where the heck did I put my copy of The Wealthy Barber?
Click HERE to read more from William Belle
Wikipedia: Canadian Taxpayers Federation
The Canadian Taxpayers Federation (CTF) is a Canadian federally incorporated, non-profit organization that claims to have over 60,000 supporters across Canada. The organization advocates lower taxes, and a reduction of what it considers to be waste in government. It was founded in Saskatchewan in 1990 through a merger of the Association of Saskatchewan Taxpayers and the Resolution One Association of Alberta.
official web site: Canadian Taxpayers Federation
CTF releases federal and provincial tax changes for New Year
Payroll tax increases bite wallets across the country: Ontario, BC and Nova Scotia hit hardest. All income levels in all provinces paying more, with low and middle income families seeing steepest increase
Income and Payroll Tax Burden for Select Income Scenarios, Adjusted for Inflation:
December 31, 2010-January 1, 2011
Payroll Taxes: 1994 to 2011; EI and CPP portions