Tuesday, July 18, 2006

Great Canadian Tax Experiment, the Wrap-Up

The receipts have been processed and the numbers have been crunched. To sum it up in three words: I got hosed. I'm paying more taxes under the Conservatives then I did under the Liberals. But hey, the government knows how to spend my money better than me…right?

A few weeks ago, on Canada Day, to celebrate the Conservative one per cent cut to the GST that came into effect that day I decided to save all my receipts for a month, track my spending, and see how much I'll actually save. Also, with the Conservatives raising/lowering the lowest income tax bracket to 15.5 per cent, I wanted to see if I came out ahead or not.

I quickly learned saving all my receipts is a pain in the ass, and some places look at you funny when you ask for one. So, I decided a 15-day window, also coinciding with one pay period, would be a representative sample. I could use that data to forecast a month's worth of spending, and add in regular monthly expenses like rent and utilities.

As I set out downtown on Canada Day to catch a Jays game it was clear some businesses hadn't changed to the new rate yet. The newsstand at Warden Station still charged $1.75 for a Black Cherry Vanilla Diet Coke, and they still do two weeks later, so I guess they've pocketed the savings there. And they're not the only businesses that seem to have done so.

The Blue Jays are passing the savings on to their fans though, even though it makes life tough for the guys hawking beer and popcorn in the stands. The Jays used to have even numbered tax inclusive concession prices to make change more easily, but that has changed. For example, with GST and PST a popcorn used to run you an expensive, but even, $5. Now it will set you back an uneven $4.95. A nickel savings. I'd imagine most people let the popcorn guy keep it.

The numbers

When you add up all the numbers and project it over the month, including everything from rent to phone and student loan to groceries and entertainment, I spent $1728/month. Man, I really need to start saving more. Not all of my spending was GSTable, for example most groceries aren't, nor is my single largest monthly expense, rent on my palatial Scarborough pad. But thanks to Stephen's one per cent GST cut I did save $3.99/month. Projected out over a year, that's $47.88. Not a lot, but hey, it's something, right?

Not quite, for now the other shoe drops. For on July 1, the new old revised lowered but higher income tax rate kicked-in and began to impact those of us that have federal tax withheld on our paycheques. Before the last election the Liberal government moved to lower the rate from 16 per cent to 15 per cent, and in their budget the Cons set the rate at 15.5 per cent, which is more than 15 per cent. They said it was to pay for their GST cut.

Now, before I have the Cons all over me, I know the Liberal tax cuts that came into effect before the last election were never officially passed and proclaimed into law. I also know that's not immediately necessary for income tax changes, and I also know that I and every other Canadian was paying the lowered rate of 15 per cent up until June 30. If I was paying 15 per cent before, and 15.5 per cent now, proclamation or no that's an increase.

So, the black and white of my pay stub shows I am paying more in federal tax now than I was before June 30, and so is every other Canadian. In my case, my pays stub for the first 15 days of July shows I paid $4.74 more to the Feds in tax this pay period than I did in the last one, or $9.49/month. Or, if you prefer, a $113.88/year tax increase, gross.

Now let's factor in those big GST savings. Subtract my GST savings from my increased tax payment and I'm behind $5.50/month. Or, over the course of the year, the Conservatives are taking $66 more in taxes from me than the Liberals were.

Remind me again who the tax and spenders are? But hey, I'm sure Steve will spend the extra $66 I'm sending him wisely, right?

Now yes, you'll say, but if I bought a brand new house or a luxury car I'd save even more. And I'd say to you man, I wish I could afford a house or a luxury car. But, you see, I've got these student loan payments because when I went to school in Ontario in the late 1990s, tuition skyrocketed when the Mike Harris Conservatives slashed university funding to pay for his "Common Sense" revolution. So, alas, that Lexus will have to wait.

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Anonymous said...

You got off pretty good. My tax INCREASE from the cons has resulted in me taking home over $100 dollars less a month now. Over twelve months it totals $1200 less a year. Curious number as it equals someones beer and popcorn money. So who's kid is getting beer and popcorn from my cheque? Do the cons really want a gay mans money for child care!!!!!

knb said...

Thanks for doing the math and laying it out so clearly.

This was of course predictable, the question is, why did so many buy into it? Going forward, the question is how many will realise the reality of the cut/increase?

Every day you hear of more and more businesses either pocketing the 1% or increasing their prices. This too was predicted.

The next Leader really has to have the ability to consisely lay out the facts.

Toronto Tory said...

However, your tax return will be much larger next year. There's the $1000 credit that everyone with a job gets - which works out to $166. There's the transit tax credit, etc...

The bottom line is you're still better off.

Anonymous said...

So Toronto Tory where did you learn math? I'm losing $1200 a year due to Tory tax INCREASES. You say I will get $166 extra this year. wow, now I'm saving! I am just losing $1034 a year. Thanks for switching that one around for me, now I don't feel ripped off.

Are your kids getting beer and popcorn money from my tax increases?

Aunty Bertha said...

Toronto Tory

Could you please provide a link to information about that $1000 tax credit I am supposed to get for having a job? I couldn't find a reference to it on the CCRA website.

Also, could you explain where the $166 figure comes from?

If the credit is like most others, it would be calculated at the lowest tax rate, which is 15.5% - that would mean a total non-rufundable credit of $155

As for the transit tax credit:

(click on public transit tax credit button)

A person who pays $100 per month ($1200/yr)on Transit recieves a total non-refundable credit of $186 (15.5% of the total paid). Better than a kick in the trousers, but not as good as they made it sound.

So I think you are right - my tax returns will be larger next year.

I think what you were trying to say was tax refunds will be larger.

Freudian Slip?

Anonymous said...

At least our tax dollars are not going to fund the Liberal election machine or some advertising agency.

Aunty Bertha said...

Anonymous said...

At least our tax dollars are not going to fund the Liberal election machine or some advertising agency.

Thank goodness for that. I am SO much happier with my increased tax dollars funding the conservative election machine and tax cuts and credits for corporations and rich people.

Wake up and smell the budget. It stinks.


Anonymous said...

The Conservatives have been on a continuous election campaign on taxpayer money since January 23rd. He played the "don't trust the press" routine so that he can have special "announcement" conferences just like when he was campaigning -it doesn't take a rocket scientist to figure that one out. God forbid he'd answer any questions outside the box - Mr. Take a Punch is using this method to campaign. He's chicken - someone might actually have some pertinent questions that are outside of the "strategy" box.

Public transportation will go up in price, retail products will go up, etc., etc....and we will be NO WHERE ahead.

I liked my last tax refund thank you very much.....now we'll get screwed that way.

Ya - you "doing a great job Brownie, whoops I mean Stevie".

Beer and Popcorn - the big deal the neo-cons made of this remark was absolute proof they don't care about those little people (kids)that fall through the cracks - you know - those poor little souls who have parents that aren't the best -alcoholics and/or drug addicts or abusive who'd rather get their fix than something for the kid - ya - they do exist. It's not all about Harper's neat and tidy yuppy crowd.

Harper probably wants to go to the polls ASAP - before anyone catches on that his policies are absolute garbage.

Milan Maligec said...

I did a calcuation about that earler as well. My totals were a bit different than yours....not different in a saving money way...just different in the screwing parents over kinda way. I never thought about doing the tax change with myself as a template. Anyways, if you guys wanna see my tax assessment, here it is.... http://madmilan.blogspot.com/2006/05/budget-2006-tale-of-stupidity.html

A BCer in Toronto said...

Anon 125, by take-home drop was over $100/m too, but I subtracted my projected GST savings to get to $66/month.

TT, you could be right, it depends on a range of things but we won't know until tax time. Until then though, I'm still $66/m more out of pocket.

Another point on the transit credit, and others. As another commentator said, it's goign to make tax returns way more complicated. You need to save all your reciepts, do the math, etc. How many more will need to hire accountants? Also, I suspect a certain per centage won't bother with the hassle, something I suspect Flaherty et al are counting on.

Agent Banana said...

Everything I save with the GST cut is going straight toward my high tuition next year!

Aunty Bertha said...

Well, now that I have been able to properly analyse my pay (we had a signing bonus included in my first pay after the new tax rate so I had to wait for the next pay), my gross pay has increased by $54 every two weeks, but my take home pay has decreased by $8.

Thanks for nothing Mr. Harper.

Saskboy said...

I just did a less thourough exam of my pay, and it will go live tomorrow morning with a picture of my paystubs.

Penny said...

I'm a (disability)pensioner who can't afford a bus pass.... So much for Steve's campaign baloney about caring for "our seniors" who built this country, bla bla bla....

Except, I'm not a senior yet, so I don't get the discounts.

Not his fault, but haven't prices also increased noticeably this year, thanks to gas prices??


AwaWiYe said...

Whatever your monthly deductions are, are irrelevant. Those are just estimates intended to keep you from having a large payable at year end.

The actual maximum federal tax difference between the LPC's proposed tax rate and basic personal exemption (can't remember the exact figure for that) and the ones the CPC are going to leave us with is $134. If you saved $134 on GST this year, you broke even. If there are any other unforeseen credits in there for which you qualify, that's gravy.

I keep an exact household budget. Most of my GST costs have been automotive fuel, groceries, odds and sods materials for home and yard maintenance (no renos this year) and utilities. Overall my expenditures have been generally lower than average, but I'm still going to do slightly better than break even. Sweet.