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Not easy to get out of poverty, even when your gross income increases significantly. The reason is simple : Quebec and Ottawa have implemented a greedy recovery system of benefits, allowances and tax credits allocated to households of low and moderate income.
You want examples ?
- Single-parent family, 1 child under 6 years of age : if her income is approximately $ 45,000 to $ 55,000, he will remain 3579 $ on the $ 10,000 increase. The tax man himself will take them out of 6421 $, for a tax of 64.2 %.
- Two-parent family, 2 incomes, 2 children 6 to 17 years : in seeing his income increase from 45 000 $ to 55 000 $, the tax authorities will leave him in the pockets only 3055 $ on $ 10,000 of additional income. For a tax rate of 69.5 %.
- Two-parent family, 2 income, 3 kids with childcare costs $ 9500 : on the $ 10,000 of additional income, if income rose from 45 000 $ to 55 000 $, this couple would barely 2114 $. This gives a tax liability of 78.8 %.
- Elderly person, living alone : on the $ 10,000 that it would be worthwhile in addition to the old-age pension and the guaranteed income supplement, it would 2939 $, that is, a tax bite 7061 $ (70.6 per cent).
- Elderly Couple : the tax generation would avert 6336 $ on the $ 10,000 of income, exceeding the old-age pension and the guaranteed income supplement.
- Single person : if income rises from $ 15,000 to $ 25,000, he will remain in the pockets 4981 $ on the $ 10,000 additional. This gives a tax rate of 50,2 %.
These few examples explain why people on the edge of poverty are literally “ripped off” by the inland revenue in suffering effective tax rates above the marginal rate of tax-the highest in Quebec, at 53.3 %. That marginal tax rate affects taxpayers whose taxable income exceeds 250 000 $.
LAFERRIÈRE & MONTREUIL
It has been 20 years of such abuse, tax to households with low or average income are reported by the university professors Claude Laferrière and Francis Montreuil, UQAM, which analyses tax are published on the website of the quebec Centre for tax training. But they are preaching in the desert.
However, with a little good will on the part of ministers of Finance, Eric Girard and Bill Morneau, they would just have to cap the total amount of tax refunds (relating to benefits, allowances, tax credits, etc) at the height of the marginal rate of tax applicable to the taxable income of taxpayers.
Thus, instead of performing a tax bite of up to 93 %, the governments require the limit in a range from 12.5 to 37.1 % for the people earning a taxable income of between 12 000 $ and 80 000 $.
It seems more sensible to me.