One of the oft-touted benefits of Canada’s federal structure is that it provides room for policy experimentation at the local level.
We are seeing that play out this election season, with both B.C. and Saskatchewan putting forward a worth policy idea.
The left-leaning BC NDP and the right-leaning Saskatchewan Party have both proposed increasing the basic income threshold below which their residents are not required to pay personal income tax.
This is an idea that progressives and conservatives across the country should be able to get behind.
For progressives, lowering income taxes for the lowest earners can be seen as an anti-poverty measure. For conservatives, tax cuts are always bread-and-butter. But allowing low-income individuals to keep more of their income can also be seen as market-oriented means of incentivizing work and encouraging self-sufficiency.
In B.C., the current provincial income tax threshold — known as the Basic Personal Amount — is $12,580 for a single person with no children. In their current campaign, the B.C. NDP have proposed immediately raising it by $10,000 to $22,580. With B.C.’s lowest income tax rate sitting just above five per cent, this increase would translate into savings of up to $500 a person each year.
Two provinces over, the Saskatchewan Party has been raising the basic income threshold since it took power in 2007. This election campaign, the party has pledged to further increase the threshold from $18,491 to $20,491 over four years. Combined with other tax measures, the party estimates they will eliminate income tax for about 54,000 low-income earners. That is no small feat in a province of almost 1.2 million.
These measures are also notable in relation to the poverty line. Statistics Canada’s low-income cut-off — an informal measure of the poverty line — is organized by community size. For rural communities, the low-income cut-off in 2022 was just over $20,000. In the largest cities, that number rises to just over $29,000. Taxing citizens whose incomes are below these levels is unconscionable.
Yet, many provinces do.
In Ontario — one of the most expensive provinces to live in — an individual starts paying tax once their income hits $12,399. In Nova Scotia, the threshold is just under $12,000.
It is difficult to discern what underlying policy rationale exists for taxing individuals at these income levels. Perhaps the idea is that some level of taxation, however modest, makes individuals aware of their responsibilities as citizens and the costs of state programs.
While this outlet supports government cultivating a sense of civic responsibility in citizens, taxing individuals at the lowest income levels is not the way to do it.
For one, Canadians of all levels already pay taxes on a whole host of purchases: sales taxes, excise taxes, fuel taxes, carbon taxes. Moreover, people living below the poverty line need to be able to attend to their most basic needs first.
Some critics will counter that a proposal to increase the basic income threshold will decrease the taxes paid by all income earners. But this concern could be easily addressed by phasing down the basic personal amount for higher-income earners, or by increasing the rate in one of the tax brackets.
For example, in Nova Scotia, the basic personal amount in 2024 is $11,481 if you earn $25,000 or less. However, it decreases to $8,481 if you earn $75,000 or more.
In short, there are few good reasons not to proceed with this change. The state runs numerous costly social programs aimed at helping Canadians — some who need the help, some who do not — cover various costs.
The role and size of these programs can be rightly debated. What is hard to dispute is that we ought to begin by letting people living with incomes below the poverty line keep everything they earn.
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