cover image: The Fiscal and Distributional Impact of Changes to the Federal Personal Income Tax Regime /

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The Fiscal and Distributional Impact of Changes to the Federal Personal Income Tax Regime /

20 Jan 2016

Summary Figure 1 shows the distribution of gains, across taxable income deciles, as a per cent of total taxable income, from the 1.5 percentage point reduction in the second bracket tax rate, a 1.0 percentage point reduction in the first bracket tax rate, and the introduction of a new tax bracket with the marginal tax rate of 33.0 per cent. [...] While the reduction to the second tax bracket tax rate would affect more individuals, the average value of the tax cut is marginal for the bottom 70 per cent of earners (Table 5-1). [...] The ETI estimates the government’s potential gain or loss in net revenue resulting from a reduction or increase in taxes through the changes in the size of the tax base.13 Since behavioural changes to tax rates occur on marginal income, the tax base used to derive the size of the behavioural response is limited to the affected income group. [...] PBO estimated the federal change in tax revenues resulting from a behavioural response by applying the ratio of federal income taxes to the 18 The Fiscal and Distributional Impact of Changes to the Federal Personal Income Tax Regime estimated total change in the tax base.15. [...] It is the percentage change in taxable income expected to result from a 1 per cent change in the after-tax value of a marginal dollar of taxable income 2. The fiscal impact of the proposed changes to federal personal income tax rates assumes that the Family Tax Cut Credit (FTCC) will be repealed for the 2016 filing year.
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Pages
26
Published in
Ottawa

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