Personal Finance Canada

1195 readers

1 users here now

Come and discuss anything related to personal finance, directly or indirectly, with other Canadians!

founded 1 year ago

MODERATORS

[email protected]

These are Canada's new tax brackets and income tax rates in 2024 (www.ctvnews.ca)

submitted 10 months ago by [email protected] to c/[email protected]

5 comments fedilink hide all child comments

cross-posted from: https://kbin.social/m/[email protected]/t/769112

These are Canada's new tax brackets and income tax rates in 2024

Cooler inflation in 2023 is affecting how much Canadians will pay in income tax this year.

you are viewing a single comment's thread
view the rest of the comments

[–] [email protected] 3 points 10 months ago* (last edited 10 months ago) (1 children)

Over the last year wage growth significantly outpaced inflation.

https://www.reuters.com/markets/bank-canada-may-trail-fed-rate-cut-wage-growth-runs-hot-2024-01-17/

According to that article wage growth outpaced inflation in 2023 by 2.3%.

This site breaks down various numbers

https://mishtalk.com/economics/how-is-canadian-wage-growth-stacking-up-to-inflation/

I couldn't find a more official source, so take the numbers with some doubt.

In any case, nominal wage growth Mar 2020 - Nov 2023 was 14.7%, which is -1.3% after inflation. If we start that window in Jan 2020 we actually have a net positive 2.1% wage growth after inflation. That is 0.5% on an annualized basis.

Wage growth has been surprisingly strong post-pandemic. I think it's going to be more sticky than inflation as well. The main 'issue' is that the wage growth isn't being matched by improved economic output, which isn't a great thing for the economy in the longer term.

[–] [email protected] 1 points 10 months ago* (last edited 10 months ago) (1 children)

Ah thanks for looking into that. The framing of the original article was pretty silly:

"Generally, where an individual’s income remains constant but tax brackets increase, an individual can expect to see their income tax liability decrease,” Abdulla added. “Most taxpayers would view this outcome as a 'good thing.'"

That is irrational. One should not mind paying more taxes because of making more money! This is similar to when people turn down a promotion so that they’re not “bumped up” into the next tax bracket.

[–] [email protected] 1 points 10 months ago* (last edited 10 months ago) (1 children)

I don't get your take. For the same nominal income you pay less taxes. For the same real income you pay the same taxes.The only way you pay more taxes is if your income grows faster than inflation.

For people on fixed incomes or who don't see pay raises the decrease in taxes paid is actually a benefit. If the tax brackets weren't pegged to inflation than those same people would be worse off.

[–] [email protected] 2 points 10 months ago

The article says that “Most taxpayers would view this outcome as a ‘good thing.’” But that is only true if, contrary to fact, "most taxpayers" have lower income growth than inflation.

I think we're talking past each other a bit instead of really disagreeing. I get your perspective that, given that one's income is fixed, it's better to pay less in taxes to reflect how much poorer you've become. Sure, that makes sense.

But here's another perspective: the tax brackets are adjusted for inflation because inflation exists. Income tax wouldn't function otherwise. So, if you're paying less nominal taxes, it's only because this year you're poorer than the last. That is a strange thing to celebrate.