Finance Minister Bill Morneau conceded for the first time Monday that his governmentâs promised tax breaks for the middle class wonât be revenue-neutral and will actually cost the federal treasury $1.2 billion annually.
Morneau announced Monday that the Liberal government has introduced a motion in Parliament lowering the income-tax rate on Canadians earning between $45,282 and $90,563 per year to 20.5 per cent from 22 per cent. To make up for that tax break, the Liberals will raise the income tax rate for those earning more than $200,000 to 33 per cent from 29 per cent.
Originally touted as revenue-neutral, the tax changes â which take effect Jan. 1 -- will actually cost the government about $1.2 billion a year, numbers released Monday show.
âWhat weâre committing to do is make sure that Canadians can understand the numbers,â Morneau told CTVâs Power Play after explaining the tax rate changes at a news conference. âAnd youâre right â itâs not revenue-neutral.â
âYes, there is a gap and weâre going to work towards making sure that we deal with that as well as many other things in the course of our mandate,â he said.
Morneau said the middle class tax cut is just the first part of the new governmentâs tax program. The Liberals have also promised a new Canada Child Benefit, as well as changes to EI premiums and some RRSP rules.
The Liberals are also bringing the annual tax-free savings account limit back to $5,500, after the Conservatives increased it to $10,000.
Morneau told Power Play that the Liberalsâ initial estimates for the cost of their economic platform were based on what they thought were âappropriate projectionsâ at the time.
He said theyâve had to âfine-tuneâ those estimates, and Canadians will have a âmuch better senseâ of those numbers and the bigger fiscal picture once the 2016 budget is released.
Last week, Morneau dodged questions about the Liberal pledge to keep annual deficits under $10 billion in 2016-17 and 2017-18. Asked about it again on Monday, he said the government has been âdealt a deck of cards thatâs a little different than what we expected.â
Between a âchallengingâ global economy and falling oil prices, Morneau said the government has a lot of work ahead. But he said the Liberals intend to deliver on their campaign promises and balance the budget âover the courseâ of their mandate.
With files from The Canadian Press