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Introduction

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Since 2015, the Government has been focused on Canadians, and on the things people need to build a better future for themselves and their families. In that time, working together, we've made a lot of progress.

The Government introduced the Canada Child Benefit, which gives more money to the families who need it most, and has helped to lift nearly 300,000 kids out of poverty.

To give a tax break to more than nine million hard-working Canadians, the Government lowered income taxes for the middle class and raised them on the wealthiest 1 per cent.

To help low-income seniors make ends meet, the Government increased the Guaranteed Income Supplement and strengthened the Canada Pension Plan to give everyone a more secure retirement.

The Government cut taxes for small businesses to help entrepreneurs grow their businesses and create more good, well-paying jobs.

And the Government is building more affordable housing in communities across the country, with Canada's first-ever National Housing Strategy, while also helping to make it more affordable for people to buy their first home.

Thanks to these efforts, and the hard work of Canadians, Canada's economy is strong and growing.

Over the last four years, Canadians have created more than a million new jobs, and stronger wage growth is helping more people get ahead. At the same time, too many people are still worried about making ends meet, and about what the future holds for themselves and their families. This is especially true for people whose livelihoods are at risk during times of economic downturn, as was recently seen in western Canada. There is much more work to be done to build an economy that truly works for everyone.

Canadians made it clear that they want a government that not only listens to these concerns, but takes real and meaningful action to address those concerns, in a responsible and balanced way—a government that is ready to respond to whatever challenges the future may bring.

A Responsible Fiscal Plan

A strong economy starts with a strong middle class—and the best way to help the middle class grow and prosper is by investing in people and in our communities. The Government has a responsible fiscal plan that will continue to do just that. It's a plan that is built on the Government's four key commitments:

Continuing to invest in people and in the things that give people a better quality of life.

The last four years have shown what can happen when the Government puts people first and invests in the things that make their lives easier: more money for families to help grow the economy, more good jobs, more liveable communities, and an estimated 900,000 fewer people living in poverty. The Government will continue to work with Indigenous Peoples to help deliver a better quality of life for their families and communities, and will build on the progress achieved for all people in Canada, moving forward with investments that will make a real difference.

Continuing to reduce the federal debt relative to the size of our economy.  

Canada's net debt-to-GDP (gross domestic product) ratio is low and sustainable. That puts Canada in an enviable position, especially compared to other Group of Seven (G7) countries. Our relatively low level of debt is a serious competitive advantage, and one that the Government is fully committed to maintaining.

Keeping our economy moving forward.

Even though our economy is doing well, the Government needs to be ready to respond to whatever challenges might arise. This Economic and Fiscal Update includes a fiscal track that recognizes the challenging economic realities Canada may face in the years ahead. It recognizes what the Parliamentary Budget Officer has affirmed: that current government spending is sustainable over the long term—and gives the Government the room it needs to invest for long-term growth.

Continuing to build confidence in Canada's economy, making sure that the world continues to see us as a great place to invest. 

Canada has a "triple A" credit rating from the three most recognized credit rating agencies. This strong rating reflects the confidence that others have in Canada's economic strength. It's the Government's goal to preserve this rating as it works to make life more affordable for more Canadians.

Lower Taxes for the Middle Class and People Working Hard to Join It

Building on the success of the 2015 middle class tax cut that lowered taxes for more than nine million Canadians, the Government is moving forward with a proposal that would put more money in the pockets of Canadians. On December 9, 2019, the Government tabled in the House of Commons a Notice of Ways and Means Motion that proposes to amend the Income Tax Act to lower taxes for the middle class, and people working hard to join the middle class, by increasing the Basic Personal Amount (BPA) to $15,000 by 2023.

The enhanced BPA—along with past government actions like the Canada Child Benefit, more help for students and more generous seniors' benefits—would help to make life more affordable for Canadians. It would mean that middle class Canadians, and people working hard to join the middle class, would pay no federal taxes on the first $15,000 they earn. This increase would cut taxes for close to 20 million Canadians, and would be phased in over four years, starting in 2020. It would put $3 billion into the pockets of Canadian households in 2020, with this amount rising to $6 billion by 2023.

When fully implemented in 2023, single individuals would save close to $300 in taxes every year, and families, including those led by a single parent, would save nearly $600 every year. It would mean that nearly 1.1 million more Canadians would no longer pay federal income tax at all.

To ensure that this tax relief goes to the people who need help most, the Government would phase out the benefits of the increased BPA for wealthy individuals.

The Government also proposes to increase two related amounts, the Spouse or Common-Law Partner Amount and the Eligible Dependant Credit, to $15,000 by 2023. The proposed increase in the BPA and related amounts is expected to save Canadians about $25.2 billion in taxes over 2019–20 to 2024–25.

What Is the Basic Personal Amount?

To help all Canadians cover their most basic needs, no federal income tax is collected on a certain amount of income that a person earns. This is called the Basic Personal Amount, or BPA. In 2020, the BPA would allow Canadians to earn close to $12,300 before owing any federal tax. The Government is proposing increases to the BPA that would see it rise to $15,000 by 2023.

Table 1
Existing and Proposed Basic Personal Amounts
Year Existing BPA1 Proposed BPA
2020 $12,298 $13,229
2021 $12,554 $13,808
2022 $12,783 $14,398
2023 $13,038 $15,000
1 Based on Department of Finance Canada projections for indexation for the 2021-2023 period.

A Single Individual Would Save Close to $300 by 2023

  • Paul lives in Wetaskiwin, Alberta. He has just graduated from college and has accepted a job paying $50,000 a year. The proposed increase to the BPA means that Paul would pay less tax starting in 2020, with tax savings of close to $300 in 2023.

A Two-Earner Couple Would Save Close to $600 by 2023

  • Jean and Robert live in Regina, Saskatchewan. Robert works full-time and earns $40,000 per year, while Jean works part-time and earns $20,000. Both Jean and Robert would benefit from the proposed BPA increase starting in 2020; their combined tax savings in 2023 would be close to $600.

A One-Earner Couple With One Child Would Save Close to $600 by 2023

  • Ian and Wendy live in Brampton, Ontario. Ian stays at home with their child, while Wendy is self-employed and earns $100,000 a year. Wendy's taxes would be reduced starting in 2020. Since she can claim the Spouse or Common-Law Partner Amount in addition to the BPA, her tax savings in 2023 would be close to $600.

A Single Parent Would Save Close to $600 by 2023

  • Amrita is a single parent living in Cambridge-Narrows, New Brunswick, with one child. She earns $40,000 a year and would see tax savings starting in 2020. Given she can claim the Eligible Dependant Credit in addition to the BPA, her tax savings would be close to $600 in 2023.

GBA+ Summary

Gender-based Analysis Plus (GBA+) is an analytical process used to assess how diverse groups of women, men and non-binary people may experience policies, programs and initiatives. GBA+ goes beyond gender to consider additional identity factors such as ethnicity, sexual orientation, age, income level, and mental or physical ability. Here is the legend for the pictograms contained in this summary. Please see the introduction to Budget 2019's Gender Report for a more detailed description of these terms and fields.

Expected Direct Benefits (gender)

●─○─○─○─○

Predominantly men (e.g. 80 per cent or more men)

○─●─○─○─○

60 per cent - 79 per cent men

○─○─●─○─○

Broadly gender-balanced

○─○─○─●─○

60 per cent - 79 per cent women

○─○─○─○─●

Predominantly women (e.g. 80 per cent or more women)

Expected Impacts (income)

●─○─○─○─○

Strongly benefits high-income individuals (strongly regressive)

○─●─○─○─○

Somewhat benefits high-income individuals (somewhat regressive)

○─○─●─○─○

No significant distributional impacts

○─○─○─●─○

Somewhat benefits low-income individuals (somewhat progressive)

○─○─○─○─●

Strongly benefits low-income individuals (strongly progressive)

Expected Impacts (intergenerational)

●─○─○

Primarily benefits youth, children or future generations

○─●─○

No significant intergenerational impacts

○─○─●

Primarily benefits the baby boom generation or seniors

Increasing the Basic Personal Amount

Increasing the BPA to $15,000 by 2023 would reduce taxes for all individual taxpayers, except those in the top tax bracket (essentially the top 1 per cent). Nearly two-thirds of Canadians who file a tax return would benefit, as over a third of filers already do not pay federal personal income tax.

It is estimated that 52 per cent of beneficiaries would be men and 48 per cent women, and that the distribution of the dollar amount of tax relief would be very similar (53 and 47 per cent, respectively). Women would account for almost 60 per cent of the nearly 1.1 million individuals taken off the tax rolls by the measure.

Individuals in a couple are more likely to benefit from the proposal relative to single individuals (72 per cent vs. 54 per cent, respectively). In about 83 per cent of all couples, at least one member of the couple would benefit. Seniors are less likely to benefit compared to non-seniors (54 per cent vs. 68 per cent), but represent a significant share of all individuals taken off the tax rolls (41 per cent).

The measure would be beneficial for taxpaying single parents (about two-thirds of whom are women), as they would be eligible for both an increased BPA and an increased Eligible Dependent Credit. This would result in a tax reduction of nearly $600 for a single parent in 2023.

GBA+ was performed: Mid-point
Target population: Low- and middle-income taxpayers

Expected Direct Benefits (gender):
Gender composition of benefitting group

Broadly gender-balanced

Expected Impacts (income, age distribution):
Income distribution

No significant distributional impacts

Intergenerational impacts

No significant intergenerational impacts

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