Canada has long been recognized as a land of opportunity, where generations have thrived thanks to progressive taxation, a strong social safety net, and effective governance. These pillars have ensured equality of opportunity, enabling Canadians to build better lives for themselves and their families. However, in recent years, the pathways that once guaranteed a middle-class life have become increasingly difficult to navigate.
Today's younger Canadians are facing unprecedented challenges. Rising housing costs, stagnant wages, and a global economy that favours the wealthy have left many struggling to secure a future that was once taken for granted. This is not due to a lack of effort on their part, but rather the result of systemic issues that require urgent attention.
The 2024 Federal Budget seeks to address these challenges by laying the groundwork for a fairer future from a tax perspective. The government's plan is built on the premise that everyone should have the opportunity to succeed, and that those who have benefited the most from Canada's prosperity should contribute their fair share to ensure the same opportunities exist for future generations.
Enhancing Tax Fairness
The 2024 Budget takes bold steps to ensure tax fairness, focusing on those who can afford to pay more. The government is introducing a top tax bracket of 33 percent for the wealthiest Canadians and modernizing the Alternative Minimum Tax to prevent the excessive use of deductions and credits by high-income earners. These changes are expected to generate $21.9 billion in revenue over five years, which will be reinvested in social programs and infrastructure that support all Canadians.
Furthermore, the Canadian government is reducing the tax rate in the second income tax bracket and raising the basic personal amount, providing over 20 million middle-class Canadians with an average savings of more than $450 in 2024 compared to prior tax rates.
In addition, younger Canadians should seek to maximize on tax-sheltered savings plans, allowing them to earn investment income without paying taxes on it. For example, an eligible Canadian with a taxable income of $100,000 in 2023 can contribute up to $18,000 to their Registered Retirement Savings Plan (RRSP), $8,000 to their Tax-Free First Home Savings Account (FHSA), and $7,000 to their Tax-Free Savings Account (TFSA) in 2024. This is in addition to any unused contribution room from previous years.
Investment income, including capital gains, within an RRSP, FHSA, or TFSA is not taxed. Contributions to an RRSP or FHSA can be deducted from a person's taxable income in the year they are made, reducing their tax liability. Additionally, withdrawals from an FHSA are tax-free.
For younger Canadians, these tax policies are especially impactful. These enhancements will help alleviate some of the financial pressures, encouraging them to start or raise families.
Encouraging Entrepreneurship
In addition to direct support for young workers, the 2024 Budget introduces the Canadian Entrepreneurs' Incentive, designed to encourage entrepreneurship by reducing the inclusion rate on eligible capital gains to 33.3 percent on a lifetime maximum of $2 million. This incentive will make it easier for young Canadians to start and scale businesses, ultimately contributing to Canada's economic growth and innovation.
Conclusion
The 2024 Federal Budget is a comprehensive plan aimed at creating a fairer future for all Canadians, with a particular focus on supporting the younger generation. By investing in housing, education, and economic growth, while ensuring that the wealthiest pay their fair share, the government is laying the foundation for a more equitable and prosperous Canada. The Budget's transformative policies promise to unlock the potential of Canada's younger generations, in a hopeful attempt for them build better lives, just as their parents and grandparents did before them.
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