Who Benefits Most? Canada Day Tax Cut Sparks Debate

Low- and middle-income earners have an additional reason to celebrate this Canada Day, as the federal government’s long-promised middle-class tax cut takes effect. This change lowers the lowest personal income tax rate from 15% to 14% on the first $57,365 of taxable income. For 2025, the rate will be set at 14.5% to account for the mid-year rollout.

Finance Minister François-Philippe Champagne states that this move will benefit over 22 million Canadians and provide $27 billion in tax relief over a five-year period. Most of that relief—86%—will go to individuals earning up to $114,750, with those in the lowest tax bracket receiving nearly half of it.

While the maximum annual savings could reach $420 per person or $840 per couple, the average taxpayer is expected to see only about $90 in savings this year due to the timing of the tax cut. The Parliamentary Budget Office (PBO) projects more modest benefits, estimating that an average family will save approximately $280 in 2026, which falls far short of the Liberal government’s claims. The PBO also warns that the cut could cost the treasury up to $28 billion over five years.

The Conservative Party has criticized the tax cut as too modest, describing it as “not even enough for a Tim Hortons breakfast sandwich” for low-income seniors. They propose a more aggressive tax reduction, suggesting a cut of the lowest rate to 12.75%, which they claim would save individuals up to $900 annually.

Although the change passed with unanimous support in the House, the full legislation awaits final approval when Parliament returns in September. Until then, Canadians can expect a small bump in their paychecks, while the broader debate over who benefits most continues.

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