OTTAWA - Canadian workers, consumers and businesses will all start paying lower taxes starting New Year's Day.
Finance Minister Jim Flaherty's surprise mini-budget in October ushered in $60 billion in tax cuts over five years, with many of those reductions coming into effect on Jan. 1.
According to the Canadian Taxpayers Federation, most Canadian families can expect to reduce their tax burden by well over $1,000 by the end of 2008 due to the combined savings from a lower GST, lower federal income taxes and provincial measures.
That is good news for Canadians, who Flaherty says are overtaxed, but also for the economy, says Dale Orr, managing director of Global Insight Canada.
Both Prime Minister Stephen Harper and Flaherty have warned in year-end interviews with numerous news outlets that the Canadian economy is entering a year of turbulence.
They blame tight financial markets and the fallout from a slowing U.S. economy, which will affect Canada's export-oriented industries.
Many economists have forecast Canada's growth to slow in 2008, particularly in the first half of the year.
"So the timing has turned out to be quite fortuitous,'' said Orr of the stimulative nature of the tax cuts.
"But I would hope Flaherty doesn't get into the business of trying to hit the economic cycle, because he'll probably miss.''
The most dramatic single tax saving most Canadians will realize in 2008 will come when they file their income tax return this spring.
Restoring a tax measure first introduced by the previous Liberal government two years ago, Flaherty cut the lowest tax bracket to 15 per cent and raised the personal exemption to $9,600, effective last January.
That means the government has been deducting more than necessary from pay stubs throughout the year and filers will be able to recoup the difference in one lump sum with their tax returns.
For a single taxpayer earning $45,000 and more, the payoff will be $223.
Taxpayers in the same tax bracket will save an additional $272 in 2008 because of the same measure, with the change reflected in their pay stubs starting Jan. 1. If paid biweekly, an employee should expect to take home slightly over $10 in additional net pay on each payday.
Lower-income Canadians will not realize as much savings. For instance, an individual earning $15,000 annually will wind up paying $121 less in taxes.
The other headline grabber from the mini-budget _ reduction of the GST tax rate on goods and services to five per cent from six _ also goes into effect New Year's Day.
Most Canadians are likely to gain between $120 and $200 in small increments with most purchases throughout the year. But the savings will be dramatic with purchases of big ticket items like homes, automobiles, furniture or appliances.
When rebates on lower-priced homes are included, a family purchasing a new $300,000 home will save $1,920 in GST, rising to $5,000 on a $500,000 residence, according to the finance department. A family spending $30,000 on a new minivan will save $300.
In addition, residents of Quebec, British Columbia and Newfoundland will realize even deeper tax cuts in 2008 as a result of provincial tax changes.
According to the taxpayers federation calculation, the biggest cuts are in Quebec, where a single taxpayer earning $45,000 will wind up with $437 more 2008, in addition to what they gain from the federal side, rising to $1,138 for an individual earning $80,000.
In Ontario, the savings for the typical $45,000 and $80,000 earners will be $41 and $126, while in B.C., they will be $164 and $400 to the good, respectively.
The exception is New Brunswick, where provincial tax increases mean individuals earning more than $52,700 will wind up paying more income tax overall.
Also looking forward to the new tax year will be Canada's businesses.
Starting Jan. 1, Canada's corporate tax rate will be trimmed to 19.5 per cent from the current 22.12 per cent. This rate is slated to come down each subsequent year until it is reduced to 15 per cent on Jan. 1, 2012.
As well, the tax rate on small businesses with incomes under $400,000 drops to 11 per cent from the scheduled 11.5 per cent rate.
Of course, what the government giveth, it often takes away and Ottawa has also brought in a slight increase in so-called payroll taxes.
The taxpayers federation estimates that employees will pay an additional $50.43 in 2008 on employment insurance and the Canada Pension Plan, while employers will pay $46.02 more per worker.
