Trudeau’s legacy includes larger tax burden for middle-class Canadians

On Monday outside Rideau Cottage in Ottawa, after Prime Minister Justin Trudeau told Canadians he plans to resign, a reporter asked Trudeau to name his greatest accomplishments. In response, among other things, Trudeau said his government “reduced” taxes for the “middle class.” But this claim doesn’t withstand scrutiny.

After taking office in 2015, the Trudeau government reduced the second-lowest personal income tax rate from 22.0 per cent to 20.5 per cent—a change that was explicitly sold by Trudeau as a tax cut for the middle class. However, this change ultimately didn’t lower the amount of taxes paid by middle-class Canadians. Why?

Because the government simultaneously eliminated several tax credits—which are intended to reduce the amount of income taxes owed—including income splitting, the children’s fitness credit, children’s arts tax credit, and public transit tax credits. By eliminating these tax credits, the government helped simplify the tax system, which is a good thing, but it also raised the amount families pay in income taxes.

Consequently, most middle-income families now pay higher taxes. Specifically, a 2022 study published by the Fraser Institute found that nearly nine in 10 (86 per cent) middle-income families (earning household incomes between $84,625 and $118,007) experienced an increase in their federal personal income taxes as a result of the Trudeau government’s tax changes.

The study also found that other income groups experienced tax increases. Nearly three-quarters (73 per cent) of families with a household income between $54,495 and $84,624 paid higher taxes as a result of the tax changes. And across all income groups, 61 per cent of Canadian families faced higher personal income taxes than they did in 2015.

The Trudeau government also introduced a new top tax bracket on income over $200,000—which raised the top federal personal income tax rate from 29 per cent to 33 per cent—and other tax changes that increased the tax burden on Canadians including the recent capital gains tax hike. Prior to this hike, investors who sold capital assets (stocks, second homes, cottages, etc.) paid taxes on 50 per cent of the gain. Last year, the Trudeau government increased that share to 66.7 per cent for individual capital gains above $250,000 and all capital gains for corporations and trusts.

According to the Trudeau government, this change will only impact the “wealthiest” Canadians, but in fact it will impact many middle-class Canadians. For example, in 2018, half of all taxpayers who claimed more than $250,000 of capital gains in a year earned less than $117,592 in normal income. These include Canadians with modest annual incomes who own businesses, second homes or stocks, and who may choose to sell those assets once or infrequently in their lifetimes (when they retire, for example). These Canadians will feel the real-world effects of Trudeau’s capital gains tax hike.

While reflecting on his tenure, Prime Minister Trudeau said he was proud that his government reduced taxes for middle-class Canadians. In reality, taxes for middle-class families have increased since he took office. That’s a major part of his legacy as prime minister.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute

Related Topics:#FraserInstitute #GradyMunro #JakeFuss CanadaTaxes feature PersonalIncomeTaxRate TrudeauLegacy

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Carbon Tax

Carney’s climate plan will continue to cost Canadians

Published on March 12, 2025

Todayville

From the Fraser Institute

By Kenneth P. Green

Mark Carney, our next prime minister, has floated a climate policy plan that he says will be better for Canadians than the “divisive [read: widely hated] consumer carbon tax.”

But in reality, Carney’s plan is an exercise in misdirection. Under his plan, instead of paying the “consumer carbon tax” directly and receiving carbon rebates, Canadians will pay more via higher prices for products that flow from Canada’s “large industrial emitters” who Carney plans to saddle with higher carbon taxes, indirectly imposing the consumer carbon tax by passing those costs onto Canadians.

Carney also wants to shift government subsidies to consumer products of so-called “clean technologies.” As Carney told the National Observer, “We’re introducing changes so that if you decide to insulate your home, install a heat pump, or switch to a fuel-efficient car, those companies will pay you—not the taxpayer, not the government, but those companies.” What Carney does not mention is that much of the costs imposed on “those companies” will also be folded into the costs of the products consumers buy, but the cause of rising prices will be less distinguishable and attributable to government action.

Moreover, Carney says he wants to make Canada a “clean energy superpower” and “expand and modernize our energy infrastructure so that we are less dependent on foreign suppliers, and the United States as a customer.” But this too is absurd. Far from being in any way poised to become a “clean energy superpower,” Canada likely won’t meet its own projected electricity demand by 2050 under existing environmental regulations.

For example, to generate the electricity needed through 2050 solely with solar power, Canada would need to build 840 solar-power generation stations the size of Alberta’s Travers Solar Project, which would take about 1,700 construction-years to accomplish. If we went with wind power to meet future demand, Canada would need to build 574 wind-power installations the size of Quebec’s Seigneurie de Beaupre wind-power station, which would take about 1,150 construction years to accomplish. And if we relied solely on hydropower, we’d need to build 134 hydro-power facilities the size of the Site C power station in British Columbia, which would take 938 construction years to accomplish. Finally, if we relied solely on nuclear power, we’d need to construct 16 new nuclear plants the size of Ontario’s Bruce Nuclear Generating Station, taking “only” 112 construction years to accomplish.

Again, Mark Carney’s climate plan is an exercise in misdirection—a rhetorical sleight of hand to convince Canadians that he’ll lighten the burden on taxpayers and shift away from the Trudeau government’s overzealous climate policies of the past decade. But scratch the surface of the Carney plan and you’ll see climate policies that will hit Canadian consumers harder, with likely higher prices for goods and services. As a federal election looms, Canadians should demand from all candidates—no matter their political stripe—a detailed plan to rekindle Canada’s energy sector and truly lighten the load for Canadians and their families.

Business

Time to unplug Ottawa’s EV sales mandates

Published on March 10, 2025

Todayville

From the Fraser Institute

By Kenneth P. Green

With a federal election looming, a group of Canadian automobile associations want Ottawa to pull the plug on the Trudeau plan to mandate that all new light-duty vehicles sold in Canada be emission-free by 2035. The Canadian Vehicle Manufacturers’ Association, the Global Automakers of Canada and the Canadian Automobile Dealers Association collectively made the request after the government recently ended its incentive program, which included rebates of up to $5,000 for electric vehicle (EV) purchases. Quebec’s EV subsidies are also drying up.

Brian Kingston, head of the Canadian Vehicle Manufacturer’s Association, said the government’s mandate is now “increasingly unrealistic.” No doubt because Canadians remain reluctant to embrace EVs. According to recent report, while 48 per cent of Canadians will shop for a car this year (up from 42 per cent last year), only half (50 per cent) will consider EVs, down 2 per cent since last year.

Similarly, an Auto Trader survey finds that while almost half of non-EV owners are open to buying an EV for their next vehicle, interest in EVs declined for the second year in a row, from 68 per cent to 56 per cent. Things are somewhat rosier for plug-in hybrid vehicles, with purchase consideration for traditional gas-electric hybrids (HEVs) and plug-in hybrids (PHEVs) increasing.

Another 2024 report from J.D. Power finds that “Just 11% of new-vehicle shoppers in Canada say they are ‘very likely’ to consider an electric vehicle (EV) for their next purchase, down 3 percentage points from 2023.” And a recent report from RBC said a softening economy and inflation helped lead to only 28 per cent of Canadians considering an EV purchase in 2024, down from 47 per cent in 2022.

It’s increasingly clear that the Trudeau government’s vaunted EV revolution, where all new cars sold in 2035 are to be EVs, is unlikely to come to pass—particularly without large subsidies that the Trudeau government ended and that Donald Trump is dismantling in the United States. Neither Canadians nor Americans are particularly interested in buying EVs that come with high price tags and inferior performance compared to traditional internal combustion vehicles.

The next federal government—whoever that may be—should heed the call of Canada’s vehicle trade associations and pull the plug on the EV sales mandates for 2035. And allow automakers to plan for making vehicles consumers want now, and will likely still want in 2035.