IM-Laurin and Dahir_2024_0314.pub

Howe Institute Shadow Budget reflects these insights by suggesting a simple change in the federal tax mix: a 2 percentage points increase in the GST rate accompanied by a 2 percentage points reduction in the federal corporate income tax (CIT) rate, and a reduction of the tax rate for the second federal personal income tax (PIT) bracket, ranging from $55,867 to $111,733, from 20.5 percent to 15 per. [...] We go further in this Memo, and double the base credit amounts for the GST Tax Credit such that taxpayers in the lower income brackets, who would not benefit from a personal income tax cut, can get compensation for their higher GST burden. [...] We simulate these positive impacts by using the Parliamentary Budget Officer’s estimate of the elasticity of taxable income that it derived by analyzing taxpayer response to the 2016 middle-income tax cut. [...] Furthermore, we model the effects of the corporate tax reduction on the eligible dividend tax credit to preserve tax integration. [...] However, some couples in the third income quartile might not gain from the personal tax reduction because of the split of family income between spouses.