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Strengthening Benefits for Canadian Workers

Budget 2009 will support Canadian workers affected by the global economic downturn by:

• Increasing for two years all regular Employment Insurance (EI) benefit entitlements by five extra weeks and increasing the maximum benefit duration to 50 weeks from 45 weeks.
• Providing $500 million over two years to extend EI income benefits for Canadians participating in longer-term training, benefiting up to 10,000 workers.
• Extending work-sharing agreements by 14 weeks, to a maximum of 52 weeks, so more Canadians can continue working.
• Extending the Wage Earner Protection Program to cover severance and termination pay owed to eligible workers impacted by employers’ bankruptcy.
• Consulting with Canadians and developing options to provide self-employed Canadians with access to EI maternity and parental benefits.

Enhancing the Availability of Training

Budget 2009 will create more and better opportunities for Canadian workers through skills development by:

• Increasing funding for training delivered through the Employment Insurance program by $1 billion over two years.
• Investing $500 million over two years in a Strategic Training and Transition Fund to support the particular needs of individuals who do not qualify for EI training, such as the self-employed or those who have been out of work for a prolonged period of time.
• Providing $55 million over two years to help young Canadians find summer jobs.
• Supporting older workers and their families with an additional $60 million over three years for the Targeted Initiative for Older Workers and expanding it to include workers in small cities.
• Responding to skilled labour shortages with $40 million a year to launch the $2,000 Apprenticeship Completion Grant.
• Providing $50 million over two years for a national foreign credential recognition framework in partnership with provinces and territories.
• Investing an additional $100 million over three years in the Aboriginal Skills and Employment Partnership (ASEP) initiative, expected to support the creation of 6,000 jobs for Aboriginal Canadians.
• Investing $75 million in a two-year Aboriginal Skills and Training Strategic Investment Fund.

Keeping Employment Insurance Rates Frozen

• Freezing EI premium rates at $1.73 per $100 for both 2009 and 2010—their lowest level since 1982—a projected $4.5 billion stimulus relative to break-even rates.

Further Developing a Highly Skilled Workforce

Budget 2009 builds on previous investments in knowledge by:

• Providing an additional $87.5 million over three years to temporarily expand the Canada Graduate Scholarships program.
• Allocating an additional $3.5 million over two years to offer an additional 600 graduate internships through the Industrial Research and Development Internship program launched in Budget 2007.

Strengthening Partnerships with Aboriginal Canadians

Budget 2009 builds on past budgets by investing in new partnership approaches to deliver crucial services. These include:

• Committing $305 million over the next two years to improve health outcomes for First Nations and Inuit individuals.
• Providing $20 million over the next two years to extend partnerships with provinces to further improve child and family services on reserves.

Tax Relief for Canadians

Budget 2009 will deliver $20 billion in personal income tax relief over 2008–09 and the next five fiscal years. Effective January 1, 2009, this includes:

• Increasing the basic personal amount and the top of the two lowest personal income tax brackets by 7.5 per cent above their 2008 levels, so that Canadians can earn more income before paying federal income taxes or before being subject to higher tax rates.
• Raising the level at which the National Child Benefit supplement for low-income families and the Canada Child Tax Benefit are phased out, providing a benefit of up to $436 for a family with two children.
• Effectively doubling the tax relief provided by the Working Income Tax Benefit to encourage low-income Canadians to find and retain a job.
• Providing up to an additional $150 of annual tax savings for low- and middle-income seniors through a $1,000 increase to the Age Credit amount.

The Canada Skills and Transition Strategy

In the midst of a period of exceptional global economic turmoil, Canadians have coped admirably with the challenges they have faced. However, the resilience of the Canadian workforce has been tested in recent months. A deepening global economic recession has begun to take its toll on workers and their families, particularly those in some of the more vulnerable sectors.

Budget 2009 addresses these labour challenges with decisive action to support workers and families. In doing so, it responds to this short-term downturn and includes a long-term strategy, recognizing that skilled labour shortages remain a critical issue in many regions of the country. The initiatives launched in this budget will not only help Canadians through a difficult economic period, but support Canadian workers in developing the skills and expertise needed to take advantage of new opportunities once the economy recovers.

This comprehensive approach is the cornerstone of Budget 2009’s Canada Skills and Transition Strategy. The strategy will provide a major financial injection of $8.3 billion in a range of initiatives to both help Canadians weather today’s economic storm, and provide them with the necessary training to prosper in tomorrow’s economy.

The Canada Skills and Transition Strategy will help Canadian workers and their families through a three-pronged approach:

• $1.9 billion to strengthen benefits that give workers more time to find the right job and get the training they need, provide companies using work-sharing arrangements more time to restructure and better position themselves to emerge from the economic downturn, and better protect workers’ wages and severance packages in the event of their employer’s bankruptcy.
• $1.9 billion to enhance the availability of training by providing unprecedented levels of short- and long-term skills upgrading opportunities for workers in all sectors of the Canadian economy, including investments in the long-term potential of under-represented groups.
• $4.5 billion to freeze Employment Insurance (EI) rates for 2009 and 2010 so that Canadian employers and employees continue to benefit from one of the lowest payroll tax rates in the world.

Strengthening Benefits for Canadian Workers

The EI program—and other federal and provincial-territorial programs—provide a broad range of financial support to help individuals and their families in difficult times. Budget 2009 proposes a series of enhancements to help Canadians and their families through the extraordinary challenges ahead.

An Extra Five Weeks of EI Benefits

The EI program exists to provide financial support to Canadians who have lost their jobs. This support adjusts quickly and automatically to changing regional unemployment rates. For example, an insured person could be eligible for a maximum of 38 weeks of benefits when the local unemployment rate is 6.5 per cent. This would rise to 42 weeks if the local unemployment rate rose to 8.5 per cent.

The Government’s aim is to ensure this financial support is delivered promptly and efficiently by streamlining delivery and reducing paper burden.

In uncertain times, however, Canadian workers look to their governments to provide additional support. Accordingly, the Government will increase all regular benefit entitlements by five extra weeks to a maximum of 50 weeks for the next two years at an estimated cost of $1.15 billion. This five-week extension effectively makes available nationally an enhanced version of the current five-week pilot project that until now has only been provided in regions with the highest unemployment rates.

This will provide all regular EI clients with the reassurance that they will have financial support for a longer period while they find new employment, should it be required. It will also provide additional income support to unemployed Canadians who would otherwise have exhausted their benefits.

Long-Tenured Workers

As the global economic slowdown has unfolded, a number of communities across the country have been particularly hard hit. Individuals who have spent years working in one industry or for one employer now face the prospect of unemployment and the need to retrain for a new job, possibly in an entirely different industry.

To ensure that Canadian workers have financial support while training for new employment opportunities, the Government will provide $500 million over two years to extend EI income benefits for individuals participating in longer-term training.

This funding will give up to 10,000 long-tenured workers additional time and financial support to allow them to gain the new skills needed to adapt to the changing economy. It will also allow earlier access to EI benefits for workers who have received severance packages, if they use some or all of that severance to purchase skills upgrading or training for themselves.

Work-Sharing

Work-sharing, a current element of the Employment Insurance program, can be instrumental in assisting businesses experiencing a temporary slowdown caused by factors beyond their control. It is designed to avoid layoffs by offering EI income benefits to qualifying workers willing to work a reduced work-week while their employer recovers.

Recognizing the current level of uncertainty faced by many businesses during volatile global markets, the Government will extend, over the next two years, work-sharing agreements by 14 weeks, to a maximum of 52 weeks, and increase access to work-sharing agreements through greater flexibility in the qualifying criteria and streamlining processes for employers. This measure is estimated to cost $200 million over two years.

The measure will permit more employers to avoid lay-offs while their industry recovers, thus minimizing the financial impact of the downturn on workers and the communities they live in.

Wage-Earner Protection Program

The Wage Earner Protection Program (WEPP) currently provides guaranteed and timely payment of wages and vacation pay owed to eligible workers by a non-paying employer following bankruptcy, up to an amount equalling four weeks of maximum insurable earnings under the Employment Insurance Act (currently $3,254).

Budget 2009 will provide more protection to workers by extending the WEPP on an ongoing basis to also cover severance and termination pay, subject to the current maximum of four weeks of insurable earnings. The enhanced protection is estimated to cost $50 million for the first two years.

These changes will better ensure that those individuals losing their jobs because of their employer’s bankruptcy can count on receiving the money that is owed to them.

Maternity and Parental Benefits for the Self-Employed

The Minister of Human Resources and Skills Development will be asked to establish an Expert Panel that will consult Canadians on how to best provide self-employed Canadians with access to EI maternity and parental benefits.

These benefits could help self-employed parents to better balance work and family responsibilities and give them the opportunity to spend more time with their newly born or adopted children.

Enhancing the Availability of Training

Employment Insurance provides $1.95 billion to help more than 600,000 EI clients a year in their search for new employment. The benefits and support measures provided include training and job search and self-employment assistance. For those Canadians who do not qualify for EI, Budget 2007 introduced an entirely new labour market program that provides $500 million per year for six years. This investment includes a broad range of labour market programming designed to meet their particular needs, with a focus on assisting groups under-represented in the labour force.

These programs—as well as other federal programs for youth, older workers, apprentices, foreign-trained workers and Aboriginal Canadians—are helping Canadians right now, and Budget 2009 will strengthen them to deliver even more support in difficult times.

Employment Insurance Training Programs

The current economic and labour market circumstances bring unique challenges for long-time workers in several key industries. Some may require in-depth, longer-term training to find new employment while others may need shorter-term assistance to find new jobs more quickly.

Recognizing these needs, the Government will provide targeted two-year funding of $1 billion, to top up the current funding of $1.95 billion annually, in order to expand the availability of training delivered through the EI program by provinces and territories. Because the impact of industrial adjustment is not uniformly distributed across the country, this two-year funding will be allocated based on the share of unemployed persons in a province or territory.

This measure will be especially beneficial for workers in those industries hardest hit by the global economic turmoil, such as manufacturing and forestry, as they prepare for careers in other sectors. It will allow 100,000 more Canadians to receive training and support measures over the next two years. The new $1-billion funding will complement the new $500 million of funding being made available to provide extended EI income benefits for those undertaking long-term training.

Strategic Training and Transition Fund

Not all Canadians are eligible for EI training. Examples include the self-employed, or those who have been out of work for a prolonged period of time. These individuals also often require a broader range of programs than EI can provide.

Budget 2009 is providing $500 million for the Strategic Training and Transition Fund to be invested over two years to support the particular needs of individuals whether or not they qualify for EI. Funding will be provided according to each jurisdiction’s share of the unemployed across Canada and will be administered through existing Labour Market Agreements with provinces and territories to ensure appropriate accountability and reporting.

This two-year fund will help to ensure that all Canadians will be able to access the training and other assistance they need, and should benefit 50,000 more people.

Youth Employment

Canada’s Youth Employment Strategy is the Government’s key program to help young people. The current labour market disruptions, however, may mean that it will be harder for many young Canadians to find a summer job.

To improve their prospects, Budget 2009 will provide two-year targeted funding of $20 million delivered through the Canada Summer Jobs program to enable more employers in the not-for-profit sector to hire summer students. To complement this support, the Government will invest $20 million over two years in a targeted two-year program to enhance the federal public service student employment program.

In addition, the Government will provide a one-time grant of $15 million to the YMCA and YWCA to place youth in internships in not-for-profit and community services organizations, with a focus on environmental projects.

These measures will significantly assist young Canadians and provide them with both valuable work experience and earnings to help support their further education.

Older Workers

Older workers in vulnerable communities face their own challenges in finding employment, which is why Budget 2008 provided an additional $90 million over three years to extend the Targeted Initiative for Older Workers (TIOW) until March 2012. The TIOW is a federal-provincial-territorial employment program that provides a range of employment activities for unemployed older workers and helps them stay in the workforce.

To better support these workers and their families, Budget 2009 is providing an additional $60 million over three years, raising TIOW funding to $50 million per year. The Government will expand the scope of the program to include vulnerable cities with populations of less than 250,000, making assistance available to more older workers in a larger number of cities, particularly those heavily dependent upon a single sector or a single employer facing adjustments.

These changes will expand the number of eligible communities and ensure that older workers across the country have the support they need to adapt to a changing economy.

Apprentices

Changing demographics mean that the current shortages of skilled labour in certain parts of the country are expected to continue and potentially expand, presenting a challenge to maintaining productivity and economic growth. The Government has put in place key initiatives to begin addressing this challenge. The Apprenticeship Job Creation Tax Credit encourages employers to hire new apprentices and the Apprenticeship Incentive Grant encourages young people to pursue careers in one of the Red Seal skilled trades.

To build on these measures and further respond to skilled labour shortages, Budget 2009 is providing $40 million a year to launch the Apprenticeship Completion Grant. Apprentices who complete their certification in any of the Red Seal skilled trades will be entitled to receive a taxable grant of $2,000.

This grant will provide an additional incentive for young Canadians to finish their training and launch rewarding careers in the skilled trades. It will benefit an estimated 20,000 apprentices each year.

Foreign Credential Recognition

As part of encouraging a competitive and prosperous Canadian economy, the Government has introduced a number of measures to help modernize the immigration system and attract the best and the brightest from around the world. Many newcomers, however, continue to have difficulty finding work that best suits their education and qualifications in part because their credentials are not always fully recognized in Canada. Achieving Canada’s economic potential requires that immigrants and newcomers have the opportunity to use their skills and talents to the fullest.

With the support of the Foreign Credential Referral Office and the Foreign Credential Recognition Program, real progress is being made in addressing barriers to foreign credential recognition in Canada. At their January 16 meeting, First Ministers and Territorial Leaders agreed to take concerted action to provide timely assessment and recognition of foreign qualifications. They asked labour ministers to develop a common framework by September 2009.

Budget 2009 provides $50 million over the next two years to support this work. This additional funding will support the efforts of governments in the development of a common approach to foreign credential assessment and ensure that immigrants are better integrated into the Canadian labour force.

Aboriginal Canadians

An essential part of Canada’s training efforts is fostering partnerships with Aboriginal groups and the private and public sectors to ensure that Aboriginal Canadians get the skills and training they need to play a larger role in the labour market, and to help them make the most of employment opportunities.

To continue to support this partnership-based approach, Budget 2009 will provide an additional $200 million over three years to support Aboriginal skills development and training. This funding will enhance the Aboriginal Skills and Employment Partnership initiative and create a new fund.

Budget 2009 invests an additional $100 million over three years in the Aboriginal Skills and Employment Partnership (ASEP) initiative. ASEP fosters partnerships with provincial and territorial governments, Aboriginal organizations and the private sector to help Aboriginal Canadians receive valuable skills and employment training. This investment builds on the success of a $105-million enhancement to ASEP announced in Budget 2007 that resulted in 16 projects being approved. The new Budget 2009 investment will support partnership-based projects that are expected to support the creation of up to 6,000 jobs for Aboriginal Canadians.

Budget 2009 invests $75 million in the new two-year Aboriginal Skills and Training Strategic Investment Fund. This will support short-term, focused initiatives designed to help Aboriginal Canadians get the specific training they require to benefit from employment opportunities, including those generated by the stimulus package. This fund will be an important step toward implementing a partnership and results based successor to the Aboriginal Human Resources Development Strategy (AHRDS). The fund will also support short-term projects that are responsive to market needs, and are partnership- and results-based, to deliver skills training to Aboriginal Canadians. Budget 2009 commits a further $25 million for 2009–10 to maintain current AHRDS funding until the new overall strategy is put in place in April 2010.

Keeping Employment Insurance Rates Frozen

Canada enjoys some of the lowest payroll taxes among countries in the Organisation for Economic Co-operation and Development (OECD), providing a competitive advantage to employees and their employers. Since coming into office, the Government has been determined to reduce payroll taxes even further, with Employment Insurance premium rates falling to $1.73 per $100 of insurable earnings, their lowest level since 1982.

To maintain this competitive advantage and support employers and employees, the Government will freeze EI premium rates for 2010 at $1.73, the same rate as 2009. This decision has a fiscal cost of $2.4 billion, providing a projected combined $4.5 billion stimulus relative to what would have been the case had rates been raised to the break-even level over these two years.

For 2011 and beyond, the Canada Employment Insurance Financing Board (CEIFB)—announced in Budget 2008—will begin setting premium rates on a break-even basis. In order to ensure that premium rate increases are gradual enough to support a strong economic turnaround, the CEIFB will be mandated not to recover any EI deficits as a result of the two-year $2.9 billion of enhanced EI benefits and training announced in Budget 2009. In addition, to ensure that the CEIFB is launched with a new and transparent rate-setting mechanism, the Government will be responding to the Supreme Court of Canada decision in the CSN-Arvida case.

Further Developing a Highly Skilled Workforce

Canada’s ability to prosper in today’s global, innovation-driven economy ultimately depends on the skills, knowledge and creativity of Canadians. Further developing a highly skilled workforce and ensuring that this talent is well applied is a priority.

Budget 2009 builds on investments made in the previous two budgets by providing an additional $87.5 million over three years, starting in 2009–10, to the federal granting councils. This funding will temporarily expand the Canada Graduate Scholarships program, which supports Canada’s top graduate students. This includes $35 million for each of the Natural Sciences and Engineering Research Council of Canada and the Canadian Institutes of Health Research, and $17.5 million for the Social Sciences and Humanities Research Council. These funds will provide for an additional 500 doctoral scholarships, valued at $35,000 each per year for three years beginning in 2009–10, and an additional 1,000 master’s scholarships, valued at $17,500 each for one year, in both 2009–10 and 2010–11. Scholarships granted by the Social Sciences and Humanities Research Council will be focussed on business-related degrees.

Budget 2009 also provides an additional $3.5 million over two years to offer an additional 600 graduate internships in science and business, through the Industrial Research and Development Internship program launched in Budget 2007.

Strengthening Partnerships With Aboriginal Canadians

Effectively responding to Canada’s global challenges must include focusing on both the short-term and long-term challenges facing Aboriginal Canadians. The Government is committed to focusing on priorities so that Aboriginal Canadians can play an even greater role in the Canadian economy. This has been done through a collaborative approach, working with Aboriginal governments and organizations, provinces and territories, and the private sector to address these priorities in a focused way. It is an approach that is producing results.

Budget 2009 includes significant new investments for Aboriginal Canadians.

Supporting First Nations and Inuit Health Programs

Better health outcomes for First Nations and Inuit Canadians are a core component of the Government’s goal of ensuring that Aboriginal people can strengthen their participation in Canada’s future. Budget 2008 provided $147 million over two years to lay the groundwork for a strategy based on greater integration of First Nations health programs with provincial and territorial health systems.

Since then, progress has been made to improve the delivery of health services through greater health system integration with willing provinces and territories and First Nations groups. Progress has also been made in addressing systemic issues such as ensuring that severely disabled children receive required health services.

Budget 2009 commits $305 million over the next two years to ensure that further steps are taken toward these goals: to strengthen current programs (Non-Insured Health Benefits and primary care services), improve health outcomes for First Nations and Inuit individuals, and move toward greater integration with provincial and territorial health systems. This investment will be supported by a $135-million infrastructure investment for the construction and renovation of health services infrastructure that benefit First Nations, including health clinics and nurses’ residences. More than 40 new projects and approximately 230 remediation projects will be completed over the next two years.

This new and substantial funding will be criticial in supporting the Government’s partnership-based approach to improving health care for Aboriginal Canadians.

First Nations Child and Family Services

The Government continues to move forward in implementing concrete changes in child and family services on reserves, together with willing provinces and First Nations partners. This approach is based on the Alberta Response Model, which helps to ensure that families receive appropriate and timely child and family services, and which has proven that early intervention, prevention and permanent placement provide concrete results. A tripartite agreement was signed in Alberta in April 2007, and this past year agreements were reached in Saskatchewan and Nova Scotia to provide First Nations child and family services agencies with new resources for a similar prevention-focused approach.

Budget 2009 provides $20 million over the next two years to ensure further progress on this strategy through agreements with other provinces, and in the process ensures more effective information gathering and enhanced accountability and reporting.

Tax Relief for Canadians

In challenging economic times, tax reductions are an essential part of the Government’s effort to stimulate the economy. Permanent tax reductions also help build a solid foundation for future economic growth, more jobs, and higher living standards for Canadians.

Measures proposed in this budget will provide $20 billion in personal income tax relief over 2008–09 and the following five fiscal years, bringing the total relief for individuals from measures introduced since 2006 to $160 billion during this same period.

An overview of all tax relief provided to individuals and businesses since 2006 is provided in Annex 2. This tax relief will be complemented by an additional $1.5 billion in support for low- and middle-income Canadian families over 2008–09 and the following five fiscal years, through enhancements to the base benefit under the Canada Child Tax Benefit (CCTB) and the National Child Benefit supplement (NCBs).

Measures proposed in Budget 2009 will reinforce the Government’s strong record of tax relief. A significant portion of the personal tax relief provided in Budget 2009—about 75 per cent in 2009—will go to Canadians with incomes in the lowest two personal income tax brackets.

Personal Income Tax Relief for All Taxpayers

Budget 2009 proposes significant new personal income tax relief that will provide immediate benefits, particularly for low- to middle-income Canadians. Specifically, Budget 2009 will increase the basic personal amount and the top of the two lowest personal income tax brackets by 7.5 per cent above their 2008 levels, effective January 1, 2009.

• The basic personal amount will be increased to $10,320 in 2009 from $9,600 in 2008, allowing individuals to earn more income before paying federal income tax.
• The top of the first personal income tax bracket will be increased to $40,726 in 2009 from $37,885 in 2008, allowing more income to be taxed at the lowest 15-per-cent rate, rather than the 22-per-cent rate.
• The top of the second personal income tax bracket will be increased to $81,452 in 2009 from $75,769 in 2008, allowing more income to be taxed at the 22-per-cent rate, rather than the 26-per-cent rate.

Normal indexation will apply to the new basic personal amount and bracket thresholds for future years.

Taxpayers will begin to benefit from the proposed personal income tax reductions as soon as the Canada Revenue Agency revises its tax withholding tables, in spring 2009.

It is estimated that, together, these measures will cost $470 million in 2008–09, $1,885 million in 2009–10 and $1,950 million in 2010–11.

Increases to the National Child Benefit Supplement and Canada Child Tax Benefit

Budget 2009 proposes to apply the new upper limit for the 15-per-cent tax bracket for income testing the National Child Benefit supplement (NCBs) and the Canada Child Tax Benefit (CCTB). As a result, low-income families will be able to earn an additional $1,894 and still receive the maximum NCBs. Families will also be able to earn an additional $1,894 before their NCBs is fully phased out or before their base benefit under the CCTB begins to be phased out.

These increases will result in additional benefits for families with income in the current benefit phase-out ranges—up to $436 for a low-income family with two children, and up to $76 for a middle-income family with two children. Table 3.4 shows the additional benefits that would go to single-parent, low- and middle-income families.

Table 3.4
Additional Support to Low—and Middle-Income Families with Children
Example—Single Parent with Two Children—July 2009 to June 2010

Family Income	Existing Benefits		Additional Benefits		New Total
	NCBs	CCTB	NCBs	CCTB
$20,000	$3,913	$2,680	$0	$0	$6,593
$25,000	$3,181	$2,680	$436	$0	$6,296
$30,000	$2,031	$2,680	$436	$0	$5,146
$35,000	$881	$2,680	$436	$0	$3,996
$40,000	$0	$2,633	$166	$47	$2,846
$45,000	$0	$2,433	$0	$76	$2,509
$50,000	$0	$2,233	$0	$76	$2,309
Note: Totals may not add due to rounding.

Increased payments under the NCBs and the base benefit under the CCTB are proposed to take effect for the 2009–10 benefit year, which begins in July 2009.

It is estimated that this measure will cost $230 million in 2009–10 and $310 million in 2010–11.

Enhancing the Working Income Tax Benefit

Many low-income Canadians, particularly those in receipt of social assistance, can face significant financial disincentives to find and keep a job. For example, a single mother on social assistance may be discouraged from getting a job as this can often mean paying higher taxes and reduced income support—this situation is often referred to as the "welfare wall."

In Budget 2007, the Government introduced the Working Income Tax Benefit (WITB), a refundable tax credit that supplements the earnings of low-�income workers to help ensure that these individuals are financially better off by getting a job. The WITB also provides important income support to low-income working Canadians. In 2007, close to one million Canadians benefited from the WITB.

Building on this important first step, Budget 2009 proposes to enhance the tax relief provided by the WITB by $580 million for the 2009 and subsequent taxation years, which is expected to effectively double the total tax relief provided by the WITB.

In recognition of the important role played by provinces and territories in providing basic income support, the Government of Canada has been working with them to harmonize benefits where possible and improve work incentives for low-income Canadians, including making province-or territory-specific changes to the design of the WITB on the basis of principles set out in Budget 2007. Quebec, British Columbia and Nunavut have already taken advantage of this flexibility. The Government will consult with provinces and territories before implementing the final design of the enhanced WITB for the 2009 taxation year.

Example of an Enhanced WITB (Taxation Year 2009)

The following example of an enhanced WITB is provided as a basis for discussion with provinces and territories.

Chart 3.1 shows how an enhanced WITB could benefit a single individual. It would provide a refundable tax credit of 25 per cent of each dollar of earned income in excess of $3,000, reaching a maximum benefit of $925 at $6,700 of earned income. Once income exceeds $10,500, the benefit would be reduced at a rate of 15 per cent of each additional dollar, until the benefit is fully phased-out at an income of $16,667.

Example of an Enhanced Working Income Tax Benefit—2009

Chart 3.2 shows how an enhanced WITB could benefit a single parent or a couple. It would provide a refundable tax credit of 25 per cent of each dollar of earned income in excess of $3,000, reaching a maximum benefit of $1,680 at $9,720 of earned income. Once income exceeds $14,500, the benefit would be reduced at a rate of 15 per cent of each additional dollar, until the benefit is fully phased-out at an income of $25,700.

Example of an Enhanced Working Income Tax Benefit—2009

The maximum amount of the WITB supplement for persons eligible for the Disability Tax Credit would also increase in proportion to the increase in the maximum WITB entitlement for single individuals.

An enhanced WITB builds on past actions to lower the welfare wall, so that low-income individuals may keep more of their earnings, as shown in Chart 3.3. In 2009, if the WITB had not been introduced, a typical low-income single parent would have only kept 25 cents of each dollar earned between $3,000 and $10,000, due to reduced benefits from federal and provincial income-tested programs and taxes. As a result of the WITB introduced in Budget 2007, this same family can now keep more than 35 cents of each dollar it earns. An enhanced WITB, such as that set out in the example, will result in the family keeping about 45 cents of each dollar earned.

The WITB significantly reduces average effective marginal tax rates on earned income between $3,000 and $10,000. The WITB increases these rates on earned income between $10,000 and $20,000, as it is being phased out. However, this increase occurs over an income range where average effective marginal tax rates are relatively low. Despite this increase, the WITB strengthens incentives to find and keep a job, by increasing the net returns from work.

Other tax relief provided by the Government has also improved work incentives for low-income Canadians. For example, the amount that a single parent with one child can earn in 2009 before paying taxes has increased by $5,080 as a result of the introduction of the Canada Employment Credit, the Child Tax Credit and legislated increases to the basic personal amount and the eligible dependant credit.

The Impact of the WITB and Other Tax Relief on Average Effective Marginal Tax Rates Faced by a Single Parent with One Child

It is expected that more than 1.5 million individuals and families will benefit from the enhanced WITB for the 2009 tax year.

The enhancement of the WITB will complement the other measures introduced in Budget 2009 to help unemployed individuals make the transition into the labour force.

Targeted Tax Relief for Seniors

To provide further tax relief to seniors, the Government is proposing to increase the Age Credit amount by $1,000 for 2009 and subsequent taxation years. This increase will provide tax savings to about 2.2 million seniors in 2009. With the $1,000 increase, the Age Credit amount for 2009 will be $6,408 and provide tax relief of up to $961 for eligible seniors.

It is estimated that this measure will cost $80 million in 2008–09, $325 million in 2009–10 and $340 million in 2010–11.

The increase in the Age Credit amount builds on the significant tax relief provided since 2006 for seniors and pensioners, including doubling the amount of the pension income credit (from $1,000 to $2,000); a $1,000 increase in the Age Credit amount in 2006; the introduction of pension income splitting in 2006; and the increase in the age limit for maturing pensions and registered retirement savings plans from 69 to 71 in 2007.

Measures introduced by the Government provide about $1.9 billion annually in tax relief to seniors and pensioners.

The Government will also be proceeding with the proposal announced in the November 2008 Economic and Fiscal Statement to reduce the required minimum Registered Retirement Income Fund withdrawal for 2008 by 25 per cent. This will provide one-time tax relief of $200 million to seniors, in recognition of the impact of the deterioration in market conditions on retirement savings.

A Balanced Record of Tax Relief

Tax reductions introduced since 2006, including measures proposed in Budget 2009, are providing substantial tax savings for individuals and families. Since 2006, the Government has reduced taxes in every way it collects revenue. All Canadians—even those who do not earn enough to pay income tax—are benefiting from the reduction to 5 per cent from 7 per cent in the Goods and Services Tax (GST), and the decision to preserve the level of the GST credit at that designed for a 7-per-cent tax rate. Moreover, various forms of personal and corporate income tax relief are allowing Canadian families, students, workers and seniors to keep more of their hard-earned money and helping businesses large and small to undertake new investment and job creation. An overview of all tax relief provided since 2006 is provided in Annex 2.

Tax Relief for Low- and Middle-Income Canadians

Many of the Government’s actions since 2006 are helping to ensure that low- and middle-income Canadians receive the greatest share of tax relief, including:

• Reducing the GST to 5 per cent from 7 per cent delivers tax relief to all Canadians, even those who do not earn enough to pay personal income tax.
• Maintaining the GST credit level, while reducing the GST by two percentage points, which translates into more than $1.1 billion in benefits annually for low- and modest-income Canadians.
• Introducing the Working Income Tax Benefit to make work more rewarding for low-income Canadians and provide important income support.
• Increasing the basic personal amount (and the amounts for a low-income spouse or dependant).
• Reducing the lowest personal income tax rate from 16 to 15 per cent.
• Increasing the Age Credit and the pension income credit.

As shown in Chart 3.4, over 30 per cent of the personal income tax relief provided by this Government in 2009 will go to Canadians with incomes under $40,726, and close to 45 per cent will go to those with taxable incomes between $40,726 and $81,452. In total, Canadians with incomes under $81,452 will receive almost three-quarters of the tax relief.

Table 3.5
Action to Help Canadians and Stimulate Spending

	2008–09	2009–10	2010–11	Total
	(millions of dollars)
The Canada Skills and Transition Strategy
Strengthening Benefits for Canadian Workers
An extra five weeks of EI benefits		575	575	1,150
Employment Insurance—long-tenured workers		250	250	500
Employment Insurance—work-sharing		100	100	200
Wage Earner Protection Program		25	25	50
		950	950	1,900
Enhancing the Availability of Training
Employment Insurance Training Programs		500	500	1,000
Strategic Training and Transition Fund		250	250	500
Canada Summer Jobs Program		10	10	20
Federal Public Service Student Employment Program		10	10	20
YMCA/YWCA		15		15
Targeted Initiative for Older Workers		20	20	40
Apprenticeship Completion Grant		40	40	80
Foreign Credential Recognition Program		25	25	50
Aboriginal Skills and Employment Partnership (ASEP)		20	60	80
Aboriginal Skills and
Training Strategic Investment Fund		25	50	75
Aboriginal Human Resources
Development Strategy (AHRDS)		25		25
		940	965	1,905
Keeping Employment Insurance Rates Frozen
Total EI rate action to date	693	2,199	1,631	4,523
Less 2009 rate action	693	1,381		2,074
		818	1,631	2,449
Subtotal: Canada Skills and Transition Strategy		2,708	3,546	6,254
Note: Total Value of Strategy including 2009 rate freeze	693	4,089	3,546	8,328
Further Developing a Highly Skilled Workforce
Canada Graduate Scholarships Program		35	35	70
Industrial Research and Development Internship program		3	1	4
		38	36	74
Strengthening Partnerships with Aboriginal Canadians
First Nations and Inuit health Programs		135	170	305
Less existing source of funds		-27		-27
First Nations child and family services		7	13	20
		115	183	297
Tax Relief for Canadians
Personal Income Tax Relief for All Taxpayers	470	1,885	1,950	4,305
Increases to the National Child Benefit Supplement and Canada Child Tax Benefit		230	310	540
Enhancing the Working Income Tax Benefit	145	580	580	1,305
Targeted Tax Relief for Seniors	80	325	340	745
Subtotal: Tax Relief for Canadians	695	3,020	3,180	6,895
Total: Action to Help Canadians and Stimulate Spending	695	5,880	6,945	13,520
Total Stimulus Value		5,880	6,945	13,520
Note: Totals may not add due to rounding.

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