The government will present its second budget on March 22, Finance Minister Bill Morneau announced earlier this week. So what could Ottawa have in store for your wallet?
The contents of the budget are tightly guarded, so it’s impossible to tell for sure what will be in it ahead of time. But keen Ottawa watchers have become adept at reading the budget tea leaves and making fairly accurate guesses about some of the provisions the government is about to table.
READ MORE: Commentary — Ottawa’s long game will determine Budget 2017 winners and losers
Here’s a look at some of measures that could be coming down the pike and might have a direct impact on your finances:
New tax and benefits measures
Tying Old Age Security and Guaranteed Income Supplement payments to a new measure of living costs
OAS and GIS payments already rise in tandem with inflation, but the Liberals noted that, according to a Statistics Canada study, the price of most things seniors buy tends to rise faster. In its 2015 elections platform, the party proposed developing a Seniors Price Index that would supplement the general Consumer Price Index to which OAS and GIS are currently indexed.
The measure didn’t make it in the 2016 budget, but it might be in this year’s government spending plan, according to a report by PwC, the global consultancy firm. PwC noted the House of Commons’ Finance Committee also recently recommended adopting the change.
READ MORE: Reality check: Are Trudeau’s changes to old age security a good idea?
Broaden access to the RRSP’s Home Buyer’s Plan
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Also in the Liberal platform was a plan to relax some of the rules around the RRSP’s Home Buyer’s Plan, which allows you to withdraw $25,000 from your RRSP with no tax repercussions to buy a house in Canada for yourself or a relative with disability. The Liberals would expand the HBP to help Canadians facing a job relocation, the death of a spouse, marital breakdown or who need to accommodate an elderly relative.
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The government may include this in this year’s budget, said Lana Paton, national tax leader at PwC in Canada.
READ MORE: Plan to use your RRSP for a down payment on a house? Don’t do it.
Raising the capital gains tax
There’s a lot of speculation among investors and tax professionals that the Liberals will hike the capital gains tax. That’s the tax you have to pay when you sell some property, such as non-registered investments or a second home, that have increased in value since you bought them.
Right now, only 50 per cent of that price difference is subject to tax, with the tax rate depending on your income-tax bracket.
The Liberals have long promised to eliminate tax breaks that mostly benefit the wealthy, a clean-up that they promised would boost government revenue by at least $3 billion.
WATCH: The Canadian Centre for Policy Alternatives (CCPA) presents its “alternative” federal budget, which argues the Liberals should to more to eliminate tax breaks for the wealthy
On the other hand, the government has recently indicated it is holding off on major tax reforms until it knows what the tax changes promised by U.S. President Donald Trump look like. Trump has pledged to deliver major corporate tax cuts that may hurt the competitive advantage of Canadian businesses.
Also, there hasn’t been enough research into the potential impacts of raising the capital gains tax, said Paton. Many economists have warned that doing so would discourage investment and reduce the pool of capital available for businesses to borrow from and finance growth.
Despite all the rumours, a capital gains tax hike seems, unlikely, added Paton.
Existing tax breaks and loopholes that could be eliminated
The Liberals have also pledged to eliminate much of the Harper-era tax breaks.
READ MORE: Federal budget 2016: Trudeau eliminates Harper-era tax credits
They got a good start on that in the 2016 budget, which wiped out the Children’s Fitness Tax Credit and Children’s Arts Tax Credit, as well as income-splitting for parents. There’s more, though, that could soon be gone, according to Paton.
Here are some likely candidates for the chopping block:
The public-transit tax credit
This allows you to claim the full amount spent on eligible public-transit passes for the year.
The Tradesperson’s Tool deduction
This allows Canadians working in the trades to claim some of the cost of buying tools for their job.
The tax credit for volunteer firefighters and search-and-rescue workers
This allows Canadians who put in at least 200 hours of volunteer work as firefighters or search-and-rescue workers to claim $3,000 on their tax return.
Such boutique tax breaks cost the government $200 million a year in missed revenue, according to the Canadian Centre for Policy Alternatives. They also make tax returns more complex and have “generally not been effective in their intended objectives and are more likely to be used by higher-income families,” the centre noted in a recent report.
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