Finance Department study details workers hardest hit by tax and benefit system for extra income

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Understanding who loses the most and wins the most and what federal programs are involved “can guide the development of approaches to lighten the burden and encourage extra work,” officials wrote in the documents.

Workers with modest incomes, between about $ 25,000 and $ 34,000, lost $ 413 for every $ 1,000 in additional earnings, the highest payback of any income level.

Right behind them were the richest 10% of working people, with incomes over $ 114,570, who gave up $ 402 for every $ 1,000 in additional earnings.

Those who earn the most pay more in taxes, while those at the bottom of the scale face a double whammy in taxes and a cut in income-tested benefits, such as the Canada Child Benefit. children.

Overall, the country’s 19 million workers would have lost, on average, $ 341 for every $ 1,000 increase in their earnings based on 2017 data, but the burden was greater for workers with children.

Officials noted that not doing much better, or doing even worse, after an increase in income could discourage employed people from taking on extra work and could prevent others. of the labor market.

The latter situation was one of the documents described as particularly pronounced for “secondary employees”. These are people who earn less money than their partners – usually women.

The Canadian Press obtained a copy of the reports and related briefing note under the Access to Information Act.

The reports presented last November, days after the federal election that saw the Liberals return to power with a minority in the House of Commons, came as the public service struggled to solve a series of issues facing a labor force. aging work.

Experts who reviewed the document have suggested the findings could help guide federal efforts now as the Liberals try to slap taxes and benefits associated with the pandemic.

Elliot Hughes, who was tax policy adviser to former Finance Minister Bill Morneau, said a thorough review of the tax system appears to be a must to see how the country can make sure those in need of help get it, without discouraging work. .

It’s politically problematic and it would probably take two years, Hughes said, but “I don’t know how you are avoiding one now.”

“Covid and all the benefits that have been added, and all the challenges that Covid has exposed or accelerated, make a review of taxes and support and benefit programs even more important than ever,” said Hughes, now at Summa Strategies .

Recovering benefits faster as incomes rise may not help promote labor market participation, said Garima Talwar Kapoor, director of policy and research at Maytree, an anti-poverty think tank.

Talwar Kapoor also said that any conversation about taxes and benefits should take into account other issues that affect work decisions, such as the cost of childcare, access to dental benefits through the health care plan. an employer or whether the job itself is attractive.

“There are a number of factors that are important when people decide whether they are going to work or not, and whether the design of government fits with public policy,” she said.

“I’m concerned that without really thinking about good jobs, we often don’t reduce the benefits provided without thinking about the impact that has on people in the longer term.”


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