Canadians should brace for multiple tax increases as they prepare for 2025.
The Canadian Taxpayers Federation released its annual report outlining major federal tax increases coming in the new year.
While many tax increases are upcoming, the federation highlighted increases to payroll taxes, the carbon tax, alcohol taxes, and the temporary sales tax holiday.
“Tax hikes will give Canadians a hangover in the new year,” said Franco Terrazzano, CTF Federal Director. “In 2025, the Trudeau government will yet again take more money out of Canadians’ pockets with payroll tax hikes and will make life more expensive by raising carbon taxes and alcohol taxes.”
The Liberals are raising the mandatory contributions to the Canada Pension Plan and Employment Insurance in 2025. The combined increase will cost Canadians up to $403 next year.
A Canadian making $81,200 or more will contribute taxes worth a combined $5,507 in 2025. Their employer will be forced to also contribute $5,938.
A previous study by the Fraser Institute revealed that Canada’s debt was “much worse” than the federal government claims it to be. This is because the Liberals count the Canada Pension Plan and Quebec Pension Plan as assets in their budgets. The report said the plans should not be counted as assets because they cannot be used to pay off Canada’s debt.
The two pensions account for around $716.7 billion in combined assets, equating to more than a quarter of the $2.7 trillion difference between Canada’s gross and net debt.
Canada’s debt officially doubled during Trudeau’s tenure on Aug. 30, exceeding $1.2 trillion. Trudeau spent more money during his tenure than every other prime minister before him combined.
A second CPP tax began in 2024 and will increase in 2025. What is known as “CPP2” will be applied to income between $71,300 and $81,200, maxing out at $396 in 2025, over double the previous maximum of $188.
The Liberal government will move ahead on planned hikes to the federal carbon tax. By Apr. 1, 2025, the tax will increase by 21 cents per litre of gasoline, 25 cents per litre of diesel, and 18 cents per cubic metre of natural gas.
“The carbon tax will cost the average household between $133 and $477 in 2025-26, even after the rebates, according to the Parliamentary Budget Officer,” reads the CTF’s release.
The Parliamentary Budget Officer has repeatedly proved that the average household pays more in carbon tax than they receive in the rebate. Despite this, the Liberals have stuck to their script, claiming that eight out of ten families get more back than they pay. Despite the Liberals remaining steadfast in their claims, eight out of ten families are not better off.
“It’s simply not credible to believe the government can impose a carbon tax, skim some money off the top, charge its sales tax on top of the carbon tax and then make families better off,” said Terrazzano.
Canadians will also be paying more for alcohol due to a 2% increase in the federal alcohol taxes beginning Apr. 1, 2025. Beer Canada estimates the 2% hike will cost taxpayers $40.9 million in additional costs in 2025-26.
The tax hike on alcohol follows a 4.7% increase in 2024. Beer Canada estimates that the alcohol tax has cost Canadian taxpayers over $900 million since it was imposed in 2017.
The Canadian Taxpayers Federation also highlighted increased capital gains tax following Budget 2024, which imposed digital services and online streaming tax.
A previous study showed that the capital gains tax alone could cost almost $90 billion in lost GDP and result in the loss of 414,000 jobs, with real GDP per capita declining by 3%.
The Canadian Taxpayers Federation also highlighted the two-month holiday tax break that could save taxpayers up to $2.7 billion. The originally proposed $250 one-time cheque and tax break were set to cost taxpayers $6.2 billion combined, without including the provincial portion of the HST cut.
However, the $250 cheque was absent in the Fall Economic Statement. The statement revealed that Canadians were facing a deficit of $61.9 billion in the 2023-24 fiscal year, over 50% higher than Chrystia Freeland formerly promised to abide by.
