Proposed changes to the Income Tax Act
June 12, 2015
The legislation recently introduced in PEI’s legislature is designed to reduce income taxes for lower income Islanders. If the proposed changes to the Income Tax Act are passed, and it looks like they will be, the thousands of Islanders having trouble making ends meet will find themselves in a better financial position. This would be welcome news for single working parents, seniors, and Islanders in the lower wage spectrum.
Many would agree that government is taking a compassionate step in the right direction with the proposed changes. At the same time, the province is aware that they will have to recoup monies lost through tax reduction in order to continue to provide quality public services to Islanders, and to meet financial targets such as bringing in a balanced budget in 2016-17. But where is the revenue going to come from?
Governments are looking at raising both personal and corporate tax rates across the country, and many provincial jurisdictions have already initiated reasonable increases. Regarding personal income tax increases on wealthier citizens, Ontario and Alberta are leading the way. At the federal level as well, many argue that corporations haven’t been paying their fair share. Since 2000, the federal corporate tax rate was cut almost in half to its present 15%. Corporate tax cuts are now costing the federal government approximately $15 billion per year. This means less money is available for programs and services, and less money is available to the provinces through transfer payments. With many Canadians feeling the pinch in regard to essential public services, there has been considerable debate about the need to return federal tax rates to more traditional levels.
The provincial government is taking a step in the right direction by moving to help lower income Islanders with necessary changes to the Income Tax Act. The question remains as to how the province will move forward to retain and improve the public services that Islanders depend on. Societies that have the highest quality of living, where economies are also succeeding, are those where each segment of society, both corporate and personal, are paying their fair share.