Budget Targets Wealthy Canadians
The federal government is moving to raise the minimum tax rate paid by wealthy Canadians and narrowing its focus on the highest earners. Budget 2023 proposes raising the alternative minimum tax (AMT) rate and imposing limits on many of the exemptions, deductions, and credits that apply starting in 2024. Through the significant use of deductions, credits, and other tax preferences, some of the wealthiest Canadians pay little to no personal income tax in a given year. The AMT is intended to ensure that the highest-income Canadians cannot disproportionately lower their tax bill through advantages in the tax system. It has not been significantly reformed since its implementation in 1986 and thousands of the wealthiest Canadians still pay very little income tax. Budget 2023 would raise the AMT rate from 15 per cent to 20.5 per cent and further limit the excessive use of tax preferences. These amendments would generate an estimated $3 billion in revenues over five years, beginning in the 2024 taxation year. The basic AMT exemption would increase from $40,000 to $173,000, significantly increasing the income level necessary to pay the AMT. This would also result in a tax cut for tens of thousands of middle-class Canadians.