Ford minimum-wage tax credit reality check

Ontario’s minimum wage is scheduled to rise to $15 per hour from its current $14 level at the beginning of 2019. On April 16th, Doug Ford pledged to cancel that hike and to replace it with a tax credit which he claimed will mean that “no matter where you work in Ontario, if you are making minimum wage you won’t pay a single cent in income tax”. The PC Party further claims that this tax credit will save the typical full-time minimum-wage earner $800 per year. While Mr. Ford’s pledge sounds appealing, it’s really a classic example of an utterly misleading sales pitch.

Tax credits aren’t cash in your pocket. If you’re a full-time minimum-wage earner (say 2,000 hours per year), Mr. Ford’s cancellation of the hike means that you will only earn $28,000 in 2019 rather than the $30,000 stipulated by the current Liberal legislation. Both federal and provincial taxes are payable on those earnings. The federal amount is the larger of the two, and it will be unaffected by Mr. Ford’s pledge. So what does Mr. Ford’s tax credit pledge actually mean to you? If you’re a single individual with no unusual deductions, your Ontario tax on $28,000 income would have been $1,116. Hence, not having to pay the Ontario amount in no way compensates for $2,000 in lost income. Your federal tax will drop a bit due to your lower income but, overall, you’ll be worse off by $510. That loss gets even worse if you’re working less than full-time, in which case you could find yourself losing $800 or more rather than gaining that amount.

Crooked salesmen get rich by making offers that sound (and usually are) too good be true. Populist politicians have typically done the same in order to get in power. Rather than dismissing Mr. Ford’s promise as yet another example of “buyer beware”, it’s worth considering just how reprehensible it is for a politician to fool people who are just barely getting by with promises to put more money in their pockets when the person making the promises knows full well that what they are really doing is taking money away from people who already have too little. Do you really want that sort of person in power? This scheme certainly suggests that, whatever Mr. Ford’s real priorities, making your life better isn’t one of them.

The following table will give you a better sense of what minimum-wage earners with differing annual hours worked will lose if Mr. Ford becomes Premier. To some, the amounts may not sound like so much but, if you’re only earning $15,000 a year, losing $860 is in fact a big deal. There will also be a significant long-term hit on your retirement income. Over time, reducing your annual income by one- to two-thousand dollars a year means that your eventual CPP income will be proportionately lower. No matter how you look at it, Mr. Ford’s proposal is bad news for you. 
The above figures are based on calculating 2017 federal and Ontario taxes owed by single individuals earning each of the 12 income levels shown in the above table. The exact amounts owing will be different for people with other deductions such as a dependent spouse or children. 2017 tax calculation numbers were used because those that will be in effect in 2018 or 2019 are not yet known, but the effect on the calculated amounts will likely be minimal.

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