Scheer's proposed tax cut isn't 'universal' — but it would save money for many Canadians

As part of our federal election coverage, CBC News is assessing the truthfulness and accuracy of statements made by politicians and their parties.

The Claim: "This means that every Canadian will see their income taxes go down, and those in the lowest tax bracket see the biggest benefit of all."

— Conservative Leader Andrew Scheer on his party's plan to reduce the rate on the lowest income tax bracket.

The Facts:

The lowest income tax bracket covers all taxable earnings between $12,069 and $47,630. That income is now taxed at a rate of 15 per cent.

The Conservatives have pledged to cut that rate to 13.75 per cent by 2023. By that point, an average single taxpayer could save as much as $444.51 per year and a two-income couple (a male and a female in this scenario) could save more than $860, the party says.

The Parliamentary Budget Office (PBO) says the proposal eventually would cost the federal government about $6 billion annually.

The Tories are calling it a "universal tax cut" but that's imprecise, said Trevor Tombe, an associate professor of economics at the University of Calgary.

While it would affect all Canadians who pay income tax, that's actually about two-thirds of tax filers. In 2017, more than nine million of the nearly 28 million tax filers had no federal income tax liability, according to the Canada Revenue Agency.

An example of a truly universal policy was the Harper government's move to cut the GST rate from seven to five per cent after the 2006 federal election. Those savings were passed on to all Canadian consumers, whether they paid any income tax or not.

Still, the current Conservative proposal would certainly amount to a sweeping cut. 

Tombe explored potential outcomes of the promise using a tool called the Social Policy Simulation Database and Model, a software package developed by Statistics Canada to help researchers parse tax policy. The PBO partly relies on the same software to run numbers.

How much the rate cut would save Canadians in income tax each year depends on a number of factors. Taken in isolation, the cut would save an average family slightly more than $700 annually, Tombe said.

But as part of their campaign, the Tories have also pitched four different tax credits. A cut to the lowest-income bracket rate ultimately would mean those credits are worth less, so there's a trade-off. If you take the credits into consideration, the overall income tax savings for an average family falls to about $400 annually, Tombe said.

More than 10 per cent of individuals who pay income tax would earn the maximum benefit of $444.51, while about 5.5 per cent of income-tax paying couples would save the maximum of $860, according to Tombe's analysis. Some families could save even more if, for example, they have a young adult living at home who also earns taxable income.

Three out of four income tax paying families across the country would see some benefit from the proposed cut, Tombe said.

Who benefits the most?

As for Scheer's assertion that "those in the lowest tax bracket see the biggest benefit of all," the truth of that claim depends on which measures are used.

Tombe and other economists have pointed out that you'd have to be earning at the absolute upper threshold of the bracket ($47,630) or more to save the maximum dollar amount the cut would offer.

That means most of the Canadians within that lowest income bracket would not see the "biggest" benefits.

It's important to remember, however, that not every Canadian values extra savings the same way. An extra $100 means more to someone with, say, $20,000 per year in taxable income than it does to someone with $200,000.

That's why economists often look at savings as a per cent of taxable income, because it's a measure that takes this difference into account. From that perspective, individuals or families earning between $20,000 and $47,630 per year would see the most benefit, according to Tombe's analysis.

Tombe said the Conservative proposal is "unambiguously more progressive" than the "middle class tax cut" rolled out by the current Liberal government. The Liberals' policy slashed the rate in the second income tax bracket, rather than the first.

"There are larger benefits for lower income households under a first-bracket cut than a second-bracket cut," Tombe said — particularly when it comes to increases in disposable income.

Verdict: Mostly true

Sources: Conservative Leader Andrew Scheer promises tax cut to save average taxpayer hundreds of dollars, CBC News; Cost estimate of Election Campaign Proposal, Parliamentary Budget Office; Trevor Tombe's analysis, Twitter; Income statistics and GST/HST statistics, Canada Revenue Agency; Canada Income Survey, Statistics Canada; Andrew Scheer pitches sports, arts tax credits for kids' activities, CBC News.