REACTION: Middle-class tax cut is a win for Canadians, not a cost for Ottawa

Montreal, June 18, 2025 — The Parliamentary Budget Officer estimates that Canadian tax filers would pay $200 less in taxes by 2029-2030, which is not a cost to government but a savings for the middle class, points out the MEI.

“Considering how heavy the tax burden is in Canada, a promise to lower taxes is welcome news,” says Emmanuelle B. Faubert, economist at the MEI. “But framing this as a cost for government is misleading: this is about Ottawa taking less of what never belonged to it in the first place.”

The Parliamentary Budget Officer has released the 5-year fiscal impact of the federal government’s plan to reduce the lowest income tax bracket from 15 to 14 per cent.

The planned tax cuts are expected to save the average Canadian filer $200 in income taxes per year by 2029-2030, and reduce government revenue by less than $6.4 billion over the five years.

In March, the MEI recommended abolishing the second federal income tax bracket to help middle class workers.

Such a measure would ease pressure on over 8.5 million middle class workers and retirees earning between $55,867 and $111,733, reducing their marginal tax rate by 5.5 percentage points.

Such a reform would return an estimated $17.9 billion to Canadian taxpayers.

Studies show tax cuts stimulate the economy, support growth, and raise living standards for the middle class and the less fortunate.

“Canadians want to get ahead, but unfortunately, work is penalized in this country,” added Ms. Faubert. “The true cost is what Canadians hand over in taxes, not the little bit less the government is taking.”

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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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