Do away with the tax ” usury “

News 25 January, 2018
  • Michel Girard

    Thursday, 25 January 2018 05:00

    Thursday, 25 January 2018 05:00

    Look at this article

    Outraged in front of the tax abuse (up to the height of 70 to 90 %) of which are victims of tens of thousands of households with low and modest incomes, many readers may wish that Quebec and Ottawa committed to put an end to this glaring inequity in tax that I objected to in my review the scandal of The tax usury-last Saturday.

    Among the players affected by this injustice tax, there’s the ex-liberal minister Marguerite Blais, who tweeted the following message : “It appears to me important to read this article… hoping that the governments will wake up one day, among others for people with low or modest incomes. “

    Reacting to the tweet of Ms. Blais, here is the comment of my colleague Josée Legault : “A social and economic injustice flagrant. In election year, political parties must commit themselves to put an end to it, ” she tweeted, referring to the scandal of the tax usury.


    As we know, governments provide a range of benefits and credits : the guaranteed income supplement for the elderly, allowances for children, the premiums at work, the tax credit-the solidarity, the credit for child-care expenses, contributions to subsidized childcare, prescription drug insurance, the GST credit, etc

    The tax problem that arises ? Be aware that the slightest rise in income among households with low and modest incomes, shall be subject, in addition to the tax, a reduction in the amount of the benefit from various social measures.

    By adding the tax payable on the increased revenues and reduction in government benefits, people find themselves with an actual tax burden which exceeds by far the marginal tax rate maximum tax (53.3 per cent) than the rich pay.

    Based on the rigorous study of professor Claude Laferrière on the METR (marginal effective tax rates), I reported in my review several examples of households taxed improperly.

    Example of abuse to the utmost : the case of a couple, with one income and three children, including one less than six years.

    Seeing its income rise by 46 000 $ to 47 000 $, this couple will receive only $ 61 to its increase in gross of $ 1000. It is subject to a tax bite of 93.9 %.

    Here are the details of 93,9 % tax. The federal will remove 402 $ (40.2 per cent), which includes $ 162 in tax, a reduction of $ 190 of the allowance in canadian children and a reduction in the GST credit of $ 50. For its part, Québec will withdraw of $ 464 (46.4 per cent), which includes a tax increase of $ 200, an increase of the prescription drug insurance of $ 104, a reduction of the tax credit-the solidarity of $ 60 and a decrease of $ 100 of the premium for the work. These withdrawals are in addition 73 $ (7.3 per cent) increase in social security contributions (QPP, employment insurance, parental insurance).


    To address the problem of tax abuse suffered by low-income households or modest, the solution is very simple.

    It is sufficient that the two governments put a cap on the taxation of income increases taking into account the reduction in benefits and tax credits. And this, of course, depending on the marginal rate of tax that applies based on the level of taxable income.

    In the case of the couple mentioned as an example, the increase of $ 1000 would have been subject to a drain of $ 371 (37.1 per cent) instead of 939 $ (93,9 %).

    It would thereby cease to “steal” households with low and modest incomes.