Canada’s Budget Introduces Tax Cuts to Alleviate Cost-of-Living Struggles

In response to the ongoing cost-of-living crisis affecting many Canadians, the federal budget has introduced a series of measures aimed at providing financial relief. Key components include a middle-class tax cut, automatic tax filing for low-income individuals, and the establishment of a permanent National School Food Program. These initiatives reflect the government’s commitment to addressing the economic challenges faced by households across the country.

Middle-Class Tax Cut Legislation

A central element of Prime Minister Mark Carney‘s election promise, the proposed middle-class tax cut is currently under consideration in the House as part of Bill C-4. This legislation aims to reduce tax rates for individuals earning up to $57,375 in 2025 from 15% to 14%. The cut is projected to benefit nearly 22 million Canadians, resulting in savings of approximately $420 per person. Over five years, the measures are expected to deliver a total of $27.2 billion in tax relief, beginning in the 2025-26 fiscal year.

Automated Tax Filing and Benefits Delivery

In a bid to simplify tax processes for low-income Canadians, the government plans to invest $71 million over five years to implement automatic tax filing. This initiative will allow eligible individuals to access essential programs such as the GST/HST credit and the Canada Child Benefit. The Canada Revenue Agency will facilitate this program by providing pre-filled tax returns that can be confirmed and filed automatically, benefiting an estimated 5.5 million low-income Canadians by the 2028 tax year.

Additionally, the budget addresses youth unemployment, which has reached alarming levels, with some cohorts facing unemployment rates near 15%. To combat this issue, the government has allocated $594.7 million over two years to create 100,000 summer jobs, starting in the 2026-27 fiscal year, through Employment and Social Development Canada. Furthermore, $307.9 million will be directed towards the Youth Employment and Skills Strategy, which aims to support 20,000 young individuals facing employment barriers.

The budget also includes funding for 50,000 work-integrated learning opportunities for college and university students, amounting to $635.2 million over the same two-year period, again commencing in 2026-27.

As Canadians navigate the financial pressures of rising costs, these measures represent a significant attempt by the government to provide relief and support for both low-income families and the youth workforce. The implications of these budget proposals will be closely monitored as they move through the legislative process and into implementation.