Multiple federal tax adjustments will affect Ontario residents this year, according to a report by a not-for-profit group dedicated to securing lower taxes for Canadians.
The New Year’s Tax Changes report was conducted by The Canadian Taxpayers Federation and outlines major tax modifications coming into effect in 2024 in every province, including alterations to income tax rates, carbon taxes and property taxes.
According to the report, the average Canadian family pays 46.1 per cent of its budget in taxes.
The report provides cost estimates for the coming year for increases to payroll taxes, such as the mandatory Canada Pension Plan (CPP) and employment insurance payments, carbon tax hikes, alcohol tax increases and bracket creep.
Bracket creep occurs when governments don’t move tax brackets with inflation, resulting in an increase in income taxes without an increase in real income.
“Inflation can automatically bump taxpayers into a higher tax bracket even though they can’t actually afford to buy more. With bracket creep, the basic personal amount is also eroded over time,” the report says.
In 2024, workers should expect to see federal-based income tax hikes as a knock-on effect of rising payroll taxes.
The federal government will also raise alcohol taxes and carbon taxes.
The table below shows the total change in federal income taxes for Canadians in 2024 with regard to changes to the CPP and employment insurance taxes.
According to the report, nearly every Canadian will pay higher federal income taxes in 2024.
On Apr 1, carbon tax will increase from $65 per tonne to $80 per tonne, meaning the current 14.3 cents per litre carbon tax will rise to 17.6 cents per litre. This will cost a family about $12.32 every time they fuel up a 70-litre minivan, according to the report. The raised rate will apply in every province and territory except Quebec.
The report also said that the carbon tax will cost the average household between $377 and $911 in 2024-25, even after rebates.
Moreover, alcohol tax will increase on beer, wine and spirits as of Apr. 1.
The Canadian Taxpayers Federation says taxes already account for almost half the price of beer, 65 per cent of the price of wine and more than three quarters of the price of spirits.
“The increase will cost taxpayers about $100 million in 2024-25,” the report says.
The federal government also introduced a digital services tax (DST) in November 2023. The Parliamentary Budget Officer estimates that the DST will cost the taxpayer $1.2 billion in 2024.
The DST is supposed to target large companies earning revenue from online advertising, such as Amazon, Google, Facebook, Uber and Airbnb. However, consumers will likely bear the brunt of the DST, according to the report.
When the French government implemented a similar tax at a rate of three per cent, vendors such as Amazon simply increased the commission charges to French vendors by the same amount.
An economic impact assessment of the French digital services tax found that about 55 per cent of the total tax burden will likely be passed on to consumers, and only five per cent to the digital companies targeted by the new tax, the report also said.
In Ontario specifically, Torontonians with residential properties left unoccupied for more than 6 months of the year will be subject to a tax rate of three per cent of the current assessed value of the property, a two per cent increase from when it was introduced in 2022.
Furthermore, bracket creep is projected for the Ontario Health Premium (OHP). Unlike most income tax brackets, OHP brackets are not indexed with inflation. Instead the OHP is automatically deducted from the wages of any Ontarian earning more than $20,000 per year.
“The OHP kicks in for anyone earning more than $20,000 annually and gradually increases to a maximum of $900 per taxpayer,” the report says.
The threshold of $20,000 has been in place for 20 years and the $900 maximum applies to anyone earning $200,600 or more, which has also not changed since the tax was first introduced. This means that every Ontarian earning more than $20,000 is subject to bracket creep, the report concluded.
