Will Canada's new tax cut change your life, or just cover your coffee? Here's what you'll save

Time of India

2 days ago

According to a new report released Wednesday(June 18) by the Parliamentary Budget Officer(PBO), the Liberal government's promised
income tax
cut is expected to save the average Canadian family $280 next year. However, while the savings may offer some relief, critics, especially those from the Conservative Party, argue that the benefit is too small to make a real difference.
The tax cut was first proposed during Prime Minister
Mark Carney
's election campaign this spring, lowering the rate on the first $57,375 of taxable income from 15 percent to 14.5 percent, starting July 1, and then to 14 percent next year.
For some families, the tax break could help ease everyday costs. But for many Canadians already facing soaring rents, food prices, and interest rates, a few hundred dollars a year may not feel like enough. As one Winnipeg senior told CBC, 'It's something, but it won't change my life.'
Relief for the middle class
Carney pitched the plan as a
middle-class relief
measure, estimating potential savings of up to $825 per year for dual-income families. Finance Canada later pegged the maximum savings at $840 per couple.
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However, PBO Yves Giroux offered a more sobering view. Because the tax cut takes effect midway through 2025, the average filer will save only $90 this year, rising to $190 in 2026.
A closer look at the numbers reveals how unevenly the benefits are distributed
A two-income couple with a child in the second income bracket will likely save about $750.
A high-earning single Canadian might see $350 back.
A single parent in the lowest tax bracket is estimated to save $140.
A single senior in the same bracket? Just $50.
Minimal impact for low-income Canadians
For many low-income Canadians, the impact will be minimal as their taxable income is already offset by credits, and the tax cut brings little change. The PBO noted:
"
The lower an individual's income, the less they can expect to save."
That prompted a sharp rebuke from
Pierre Poilievre
's Conservatives, who issued a statement saying, 'This tax cut won't even buy a breakfast sandwich a month for a low-income senior.' They slammed Carney for offering Canadians 'mere cents a day,' calling the move marginal and insufficient.
Conservatives still in favour of the tax cut
Despite the criticism, the Conservatives said they will vote in favour of the tax cut, but are pushing for more. Their campaign had promised a deeper 2.25-point tax cut, to be phased in over four years.
Meanwhile, the fiscal cost of the Liberal plan is significant. The PBO estimates the gross cost at $64 billion over five years, with a net cost of $28 billion once reduced credits are factored in. Finance Canada places that closer to $27 billion.
The legislation was introduced via a 'ways and means' motion last month and is set to take effect July 1, though it still awaits final passage in Parliament.