Nothing much happened to your taxes on Jan. 1, right? Think again. You may be on the hook to various governments for hundreds or even thousands of dollars more this year.
Here are some of the new ways they’re going to be picking our pockets in 2013:
Increased CPP, EI contributions. Thanks to indexing, we pay more every year to keep the Canada Pension Plan solvent. It’s a great program but it’s getting expensive. Last year the maximum contribution for an employee was $2,306.76, matched by the employer. A self-employed person had to pay the whole shot: $4,613.52.
For 2013, the maximum for an employee increases to $2,356.20, or $4,712.40 for someone who is self-employed. That’s an increase of 2.14% which is significantly higher than the current inflation rate, which was 0.8% in November. The maximum pensionable earnings this year has been set at $51,100.
Employment insurance costs will also be higher. Anyone who earns more than $47,400 will have to contribute $891 in 2013, a $51 increase (6.1%) from last year. It all adds up to less money in the paycheque.
Medical expenses. The annual indexing of tax brackets normally works in our favour. For instance, this year’s basic personal amount (on which no tax is payable) increases to $11,038 from $10,822 last year.
But in a few cases indexing works against us. The medical expense tax credit is an example. In calculating the credit, you must first deduct 3% of your net income from your total eligible expenses. This reduces the amount you can actually claim. However, there is a ceiling on the deduction. It was $2,109 in 2012 but for 2013 it has increased to $2,152, up a little more than 2%. It’s not a lot but it may add a few more dollars to your tax bill.
Higher fees. The federal Conservatives are philosophically opposed to raising taxes but they have no compunction about jacking up user fees. The most blatant example is the big jump in the cost of getting a passport. A five-year passport goes from $87 to $120, a 38% hike. Since we all now need passports just for a simple day trip to the U.S., most Canadians will be affected.
Want to take your kids to Disney World? On a percentage basis, the cost of their passports will go up even more, from $37 to $57. That’s a 54% hike.
And passports are just the tip of the iceberg. Parks Canada is holding consultations on a plan to end its five-year price freeze and raise rates by 5%. Fees are going up for food inspection and other services.
This is big business for Ottawa. According to a report published last year by Parliamentary Budget Officer Kevin Page, the federal government collected more than $8 billion in user fees in the 2010-11 fiscal year. That was more than double the amount received a decade earlier. Page’s office said user-fee revenue has increased at a rate of about 9% a year since 2000.
Good thing Ottawa isn’t raising taxes, too. We’d all be broke.
New Ontario tax bracket. Ontario’s Liberal government is not as reluctant to raise taxes as the federal Conservatives. Last year’s budget contained a new tax bracket, aimed at the super-rich (those with incomes greater than $500,000). The new tax took effect last July 1, raising the combined federal and provincial 2012 marginal tax rate on this group to 47.97%. It went up again on Jan. 1 to 49.53%. Previously the top marginal tax rate in Ontario was 46.41%
An estimated 25,000 families will be subject to this high-income surtax. If you’re among them, consider yourself lucky. Sure, your taxes will go up — but, heck, you can afford it.
U.S. Medicare tax. Despite strong opposition from Republicans, taxes are also going up in the United States. American citizens living in Canada (and there are a lot of them) may be hit by a new tax to help pay for President Barack Obama’s health-care program.
It’s a 3.8% surtax on investment income and it applies to single people earning more than $200,000 or married couples filing joint returns (allowed in the U.S. but not here) with income in excess of $250,000. The tax applies to interest, dividends, capital gains, partnership income and — this is the kicker — retirement income.
Americans living here are required by U.S. law to file a tax return with the Internal Revenue Service, as well as a Canadian return. However, they usually don’t end up owing anything to Washington because Canadian tax rates are higher and they can claim a credit for those.
But the Medicare surtax is an exception. Experts say that, because of the way it is structured, it will not qualify for the foreign tax credit.
The bottom line is that governments at all levels are desperate for more money and there’s only one place it can come from — us.
Call it The Big Squeeze.
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