Liberal plan to raise basic personal income tax deduction to cost $21B over 5 years: PBO

Increasing the basic personal income tax deduction to fulfil a Liberalcampaign promise will cost the federal governmentmore than $21 billion in foregone revenue over the next five years, says a report by the Parliamentary Budget Officer.

During the federal election, Prime Minister Justin Trudeau promised to increase the basic personal deduction to $15,000 from the current $12,298 through a means-tested roll-out meant to benefit people earning under $147,000.

Canadians only pay taxes on income greater than the basic personal amount.

The PBObased its cost calculations on the assumption that, under the government's plan, the basic personal amount would be increased each year from 2019-20to 2023-24, with an initial increase to $13,229 this year.

The Liberal government said the means-tested tax change would save the average family $585 a year once the change has been fully implemented.

The PBO estimate is close to that amount: $573 in savings for a two-parent family with children.

The benefit from the increase in the personal exemption drops as incomes rise; Canadians earning more than $210,371 will end up getting nothing.

The Parliamentary Budget Officer estimates that the change will cost the federal treasury $783 million this year, rising to $3.4billion in 2020-21, $4.5billion in 2021-22, $5.8billion in 2022-23 and $6.8billion by 2023-24.

The PBO numbers differ slightly from the Liberals' own costing of the change, which said the fully implemented change would cost $5.6 billion a year when fully implemented.

The Liberals said this tax change would lift about 38,000 Canadians out of poverty.

Once the tax change is fully implemented, the basic personal income amount will be indexed to the Consumer Price Index in future years.

In December, the Liberals introduced a ways and means motion to amend the Income Tax Act .

The NDP criticized the tax changeduring question period in the House of Commons Tuesday, saying the tax cut will help the wealthy more than lower-income Canadians.

"Liberals are taking from the poor and giving to the rich. They've got Robin Hood backwards," NDP MP Peter Julian said.

New Democrats said they want the Liberals to restrict any financial benefits from the tax changeto people earning $90,000 or less. The money goingto Canadians earning more than that amount, the party said, should be used to fund a national dental care program for people earning $90,000 or less.

Finance Minister Bill Morneau told the House Tuesday that the tax changewas designed to helpas many people as possible. He said the change will put more money into the pockets of 20 million Canadians and would be means-tested to ensure the rich don't benefit from it.

"It will help those people that are most in need of help," Morneau said.

The Conservatives also criticized the plan, saying the tax changes willadd to the deficit.

"Once again, Liberal promises will be more expensivethan advertised. Poor arithmetic will mean even bigger deficitsthan expected. The government must produce a plan to controlspending, and to contain and eliminate the growing deficit," said Pierre Poilievre, the Conservative finance critic.