Question Period Note: Bill C-4 and Canadians with Disabilities

The National Disability Network (NDN) is claiming that the tax cut the Government is introducing via Bill C-4 will make lower-income Canadians with disabilities worse off

• The Government is committed to making life for affordable for all Canadians. Persons with disabilities, many of whom live below the poverty line and who are often among the first groups affected by downturns in the job market, are at particular risk.

• Budget 2024 included an investment of $6.1 billion over six years for a new Canada Disability Benefit, which will provide a maximum of $2,400 per year for low-income, working-age persons with disabilities.

• First payments of the Canada Disability Benefit are planned for July 2025.

Personal income tax is calculated by applying a series of escalating marginal rates to various tranches of a person’s income. For the year 2024, everyone with taxable income was charged 15% federal tax on the portion of that income up to $55,867. If your income is higher, you pay higher tax rates on the remainder.
The Government has proposed in Bill C-4 to reduce this marginal rate to 14% effective July 1, 2025, which would result in a tax rate of 14.5% for the 2025 tax year, and 14% for 2026 and subsequent years.
An individual’s tax-owed can be reduced, and in some cases reduced to zero, by non-refundable tax credits. Some tax credits, like the Disability Tax Credit, are expressed as a flat amount; in other cases, the individual can claim itemized amounts spent (up to prescribed maximum amounts) on things like medical care and supplies (under the Medical Expense Tax Credit). Nearly all the non-refundable tax credits an individual is entitled to are added up and multiplied by the lowest marginal tax rate.
Because people with disabilities, especially those with severe disabilities, have lower incomes and because they tend to have access to more tax credits (recognizing the extra costs and burdens they face), a tax rate reduction, which also reduces the rate applied to tax credits, is of less benefit to them.
The National Disability Network (NDN) states that lower-income persons claiming these credits may actually be worse off with the lower tax rate, because the loss of tax credits could exceed the benefits of owing less tax to begin with. However, the examples cited in the materials are inaccurate.
For instance, the NDN claims that a woman with an annual income of $12,000 would pay over $500 in federal income tax. However, taxpayers with incomes of $16,129 (in 2025) or less do not pay any federal income tax, as they can claim a Basic Personal Amount that shields all their income from taxation.
In general, absent very unusual circumstances, a reduction to the lowest marginal tax rate and a corresponding reduction to the tax credit rate will leave taxpayers better off or unaffected. This has been confirmed by the Department of Finance.
NDN’s policy proposal to retain a 15% tax credit rate for the DTC and METC falls under the mandate of the Minister of Finance and National Revenue. It would not fully address the basic issue—that low-income people and those with severe disabilities pay less tax in the first place and therefore do not gain as much from a tax cut.

None