One of the first initiatives of the new Liberal government is to lower the taxes on the “middle class” and raise the taxes on the highest 1% of income earners. During the election the Liberal party campaigned that these changes would cancel each other out (the lost revenue from the tax cuts would be made up by the increased taxes on the most wealthy). The party said during the campaign that raising the level of taxes on the top income earners, along with reducing the limits of the tax-free savings accounts would bring in an additional $3 billion.
On Monday, Finance Minister Bill Morneau is conceded for the first time that the changes are going to cost the federal treasury $1.2 billion annually, starting in the 2016-17 fiscal year.
A recent study by the C.D. Howe Institute think tank said the changes would encourage big earners to make more of an effort to avoid taxes, while the rate reduction itself could cost government finances more than expected.
This acknowledgement from the Finance Minister, along with the realization that the Liberal government may not be able to keep to its self imposed $10 billion deficit ceiling has critics concerned the government will not be able to balance the budget as they planned in the fourth year of their mandate.