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Home > Features > The 2003 Federal Budget: ‘Northern Tiger’ Spends Big |
Budget Impact on Canadians
The direct financial effects of the budget for Canadian households
While no major tax reductions are contained in the budget, there are a few changes
that will affect the income and expenses of Canadians. Here is a breakdown of those
changes.
Child Tax Credits
In 2002, a single mother earning $12,000 per year with one child received a tax credit
of $2,448. This will increase to $3,240 by 2007. For the government, this amounts to
a $965 million/year increase in the Canada Child Tax Benefit (CCTB).
Employment Insurance
There is a reduction in the Employment Insurance premiums deducted from paycheques.
The Government will reduce the EI employee contribution rate for 2004 to $1.98 per $100
of insurable earnings. Based on a $50,000/year salary, the reduction will amount to
savings of $50/year. The budget notes that this is the 10th reduction in the rate since
1994.
Air Security Tax
The reduction in the air security tax is part of the budget's ‘Accountability’ section.
It appears that the government was overcharging airline passengers for its new, post
September 11th security measures. As a result - and reflecting the impact of the move
to full accrual accounting in the budget - the Government is reducing the charge on
flights within Canada by over 40 per cent, from $12 to $7 for one-way travel, and from
$24 to $14 for round-trip travel.
Registered Retirement Savings Plan
The maximum allowable RRSP contributions are going up. Based on an income of $80,500/year,
the previous contribution ceiling was $13,500 in 2002; in 2003, the amount will increase
to $14,500.
Capital Tax
In order to stimulate the small business sector of the Canadian economy, the Capital
Tax burden will be decreased. Based on a start-up business with $20 million in assets,
but a net income of only $30,000, there used to be $31,151 charged for the corporate
Capital Tax. As this tax is phased out, the taxes will drop to $7,987.
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