9% Ontario Sales Tax
A reduction in Ontario sales tax from 13% to 9% will have positive effects on consumer spending and business profitability. Reducing the province sales tax will significantly benefit lower-income individuals and shift the revenue burden onto the wealthy through a small increase in their Personal Income Tax (PIT) which will create a more equitable tax system. The immediate effect would be a reduction in the cost of goods and services for ALL consumers. This change would particularly benefit lower-income households, who spend a larger proportion of their income on consumption. The decrease in sales tax would increase their purchasing power, making everyday necessities more affordable.
To address revenue loss from a sales tax reduction, a very modest increase in personal taxes for the wealthy would be introduced. This shift would transfer the shared financial burden from lower-income individuals to those with greater wealth, aiming to maintain public revenue while making the tax system fairer. Lower-income individuals would benefit from reduced costs on essentials enhancing their quality of life. Meanwhile, wealthy individuals would help cover the revenue shortfall, contributing to a more balanced tax system and better-funded public services.
Restructuring The Personal Income Tax Tiers
By re-organizing the Personal Income Tax (PIT) amounts and creating new income tiers starting for individuals making more than $1 million a year. With my approach, we can achieve a more targeted approach to improving economic fairness while generating additional public revenue. This restructuring of the personal tax income would involve offering modest tax decreases for middle-class and lower-income individuals while implementing a slight tax increase for higher-income earners. This strategy aims to create a significant financial surplus which could be around $17-25 billion annually. This surplus could then be used to fund essential projects like Affordable Living Communities (ALC) and other critical services. It is important to note that this discussion focuses solely on Personal Income Taxes (PIT) and does not involve corporate or business taxation
The current (PIT) framework with its existing tax tiers is outdated. Over the past decade income levels have risen significantly and the tax system has not kept pace with changes. Here is an overview of the implications and challenges of this issue:
Increased Income Levels: Over time, personal incomes have risen significantly due to inflation, economic growth, and changes in the job market. However, current tax tiers have not been adequately adjusted or created to reflect these changes. As a result, higher-income earners are often still classified within the same tax tiers as middle-class income levels, leading to an imbalance in the tax system.
Bracket Creep: As individual wages increase, lower-taxed individuals are being pushed into higher tax brackets, even if their real purchasing power has not improved. This phenomenon, known as “Bracket Creep” results in higher effective tax rates on income that is not substantially more valuable in real terms. To prevent this from happening, it is necessary to create new tax tiers that accurately reflect the changes in income levels and maintain fairness in the tax system.
Inequitable Tax Burden: The current tax tiers, once effective in addressing income disparities, no longer align with todays economic reality. With a significant increase in billionaires and millionaires, both elites and ultra-elites are benefiting from outdated tax brackets. These individuals now pay the same marginal rates that were once reserved for those deemed to be exceptionally wealthy but are now just classified as high-income earners due to the rise in overall wealth in society. To address this there needs to be new income tiers created to better reflect contemporary income disparities and ensure a fairer distribution of tax burdens.
Impact on High-Income Earners: For high-income earners, the current top tax bracket might not be sufficiently progressive. As more individuals earn substantially more than the top threshold of $246,753, the effectiveness of the tax system in addressing income inequality diminishes. This has led to a situation where the tax system fails to adequately redistribute wealth or address the widening disparity between different income groups, particularly those making millions or even billions annually.
The New Tiers
$0 – $56,000: By reducing the “low-income” tax rate in this tier, it would provide some immediate relief to low-income and lower-middle-class individuals. A modest decrease here will enhance their financial stability and increase disposable income, promoting greater economic participation and well-being. This change will alleviate some financial pressures and enable more spending on essential goods and services, thereby supporting economic growth.
$56,001 – $112,000: Adjusting the “low-middle class” tax rate lower. It will again provide substantial relief to a significant portion of the population. Increased take-home pay will support economic growth through enhanced consumer spending and savings.
$112,001 – $174,000: A modest reduction in tax rates for this group “middle class” will also provide meaningful benefits and contribute to financial stability for many families, improving their overall quality of life.
Conversely, a slight increase in tax rates for the significantly higher income earners will help maintain a progressive tax system and ensure that those with greater financial resources contribute a fairer share of public revenues. For example:
$174,001 – $247,000: Implementing a modest increase in tax rates for single individuals in this “upper-middle class” tier would align with progressive taxation principles while having a minimal impact on the individuals.
$247,001 – $1,000,000: A small incremental increase for the “high-earning” individuals would generate additional revenue without imposing significant hardship, given their substantial financial capacity.
$1,000,001 – $5,000,000: For the “elite” individuals earning between $1 million and $5 million, a moderate increase in tax rates could further contribute to the progressive tax system, ensuring that those with significant incomes contribute proportionately more.
$5,000,001 and above: For the wealthiest individuals, the “ultra elites” who earn above $5 million annually, a slightly higher tax rate could be implemented. Given their substantial financial means, this increase would have a relatively small impact on their overall financial situation while generating significant additional revenue.
We need to simplify taxes and remove many of the tax breaks for the wealthy as it is a necessary and important step towards creating a fairer tax system. Many tax breaks and deductions disproportionately benefit only higher-income individuals, allowing them to reduce their taxable income significantly. This means they often pay a far lower percentage of their income in taxes compared to lower and middle-class earners.
So when simplifying the tax code by eliminating and reducing these breaks will help ensure that everyone pays a fair share based on their actual income. By making the tax system more straightforward and equitable, the country’s financial burdens can be distributed more evenly, reducing the disparity between the ultra-wealthy and those with lower incomes. This approach will also enhance public trust in the tax system by making it clearer and more just for all taxpayers.
These slight income tax increases for the wealthy will have no substantial impact on their daily lives due to their marginal nature relative to their overall income. For the ultra-wealthy, even a significant tax hike represents only a tiny fraction of their vast earnings. This tiny incremental increase is a small percentage of their total income, which means it will not affect their ability to maintain their current lifestyle or make everyday financial decisions.
Their financial situations are typically cushioned by considerable savings, investments, and assets. These financial resources provide a buffer against any minor adjustments in taxation. As a result, a slight increase in income tax will not disrupt their financial stability or standard of living. Their wealth is often diversified across various investment vehicles which means that even with a substation tax increase their overall financial health would remain secure.
The elites spending habits and lifestyle choices are far beyond the reach of any modest tax increase. Their expenditures on luxury items, high-end services, and discretionary spending far exceed the impact of a slight rise in tax rates. This means that their quality of life, including their daily activities and financial decisions will remain unaffected by such tiny tax adjustment.
Moreover, many wealthy individuals employ sophisticated tax planning strategies that can mitigate the effects of a small tax increase. These strategies help to optimize their tax liabilities, ensuring that even a slight increase does not significantly alter their financial situation. So a marginal increase in income tax will be a negligible adjustment compared to their substantial income, leaving their daily lives and economic well-being largely unchanged.
I am committed to reforming the Personal Income Tax (PIT) system to enhance economic fairness and generate additional public revenue. By revising tax amounts and introducing new income tiers, we can create a more balanced system. This approach involves modest tax decreases for middle-class and lower-income individuals, coupled with slight increases for high-income earners, especially those with incomes exceeding $1 million. This adjustment is projected to generate a financial surplus of approximately $15-20 billion annually, which could be used to fund critical initiatives such as Affordable Living Communities and other essential services. Additionally, this could reduce the sales tax from 13% to 9%, lower the cost of goods and services, providing significant relief to lower-income households and stimulating consumer spending.
The current tax system imposes an inequitable burden on lower-income individuals and families, who often struggle to meet basic needs while contributing proportionally the same as wealthier individuals. This disproportionate burden exacerbates their financial challenges and hinders their ability to achieve economic stability and upward mobility. Conversely, the wealthy benefit from tax breaks and lower effective tax rates on investments, which further widens the economic gap. To address this, we need a more progressive tax system where the wealthy contribute a fairer share. By shifting some of the tax burden from lower-income individuals to those with greater financial capacity, we can create a fairer system that not only helps address income inequality but also supports economic stability and contributes to paying off the national debt.