All Canadians were able to get a handout from the new government in the form of a tax relief. In an earlier press release dated October 31, 2006, that included Canada’s Tax Fairness Plan the government attempted to build on the tax cuts announced in the budget by proposing significant positive measures to help Canadian seniors by:
Increasing the age credit amount by $1,000 retroactive to January 1, 2006.
Introducing income splitting for pensioners to increase the rewards from retirement saving effective as of the 2007 taxation year.
Following the October announcement, on November 23, the Advantage Canada: Building a Strong Economy for Canadians strategy was released. According to the release, a key element of the strategy is to provide a tax back guarantee to Canadians by dedicating all interest savings from reducing the federal debt to personal income tax reductions. Minister Flaherty stated that “as debt reduction continues and interest savings accumulate, so too will the tax reductions for Canadian families and taxpayers-less debt means less interest means less taxes”. For example, debt reduction in 2005-06 will result in ongoing interest savings of $660 million per year and, combined with interest savings from planned $3-billion annual debt reduction, will climb to $800 million in 2007-08 and $1.4 billion per year by 2011-12, resulting in significant personal income tax reductions.
In addition to these strategic benefits that will allow seniors to keep more of their hard earned money invested for retirement, all personal income tax amounts will be adjusted by 2.2 per cent, effective January 1, 2007, to ensure that inflation does not cause people to pay more income tax.