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i was real pissed about the health care premiums until i read this:
i didnt know only peopel above a certain tax bracket were supposed to pay...
source
yes its still bullshit...but im not as mad considering i make less than $20,000
| quote: | How the new health tax — er, premium — will work
JAMES DAW
The new Ontario health premium is one strange tax, er, premium.
It will sure feel like a tax when it's added to our payroll tax deductions starting July 1.
Like income taxes, premiums will only apply to taxable income, after deductions for retirement savings, union dues, and child-care expenses. Those with low incomes will pay nothing, others will pay from a few dollars to $900 a year.
Premiums will rise with taxable income, at 6 cents per dollar above $20,000. Someone at $25,000 will pay $300 a year.
At higher incomes, the total premium will jump up in $150 increments to $450 at $36,600, $600 at $48,600, $750 at $72,600 and $900 at $200,600.
So that's somewhat like the progressive income tax brackets, which jump to a higher level of tax at certain thresholds. Between those thresholds, though, the premium will be regressive. It will shrink as a percentage of income the more the taxpayer makes.
There is one good thing about a regressive tax. Once you're paying the premium for a certain band of income, you will not be discouraged from working longer and harder to earn more.
The exception will be in a $600 band of income near the thresholds, when the additional premium will be like a flat 25 per cent tax.
Take someone who makes $36,000 a year. If he or she works overtime to earn $600 extra, $150 will go to the premium. After paying income taxes, Canada Pension Plan and Employment Insurance premiums, the taxpayer will be a minority participant in the extra income.
Someone right at the threshold will keep less than half of a $600 raise. Heather O'Hagan of KPMG calculates the marginal tax rate and premium rate would be 64 per cent at $36,000, 56.1 per cent at $48,000 and 68.4 per cent at $72,000.
Donald Drummond, chief economist for the Toronto Dominion Bank, said there may be some situations where a person would lose almost the entire $600 raise. The person could also see a reduction in the Canada Child Tax Benefit, the goods and services tax credit and provincial tax credits for low-income earners.
"It's bizarre," argues Drummond.
"You would be forced into tax planning. There is no way that anyone is going to report (taxable income) between $36,000 and $36,600."
Taxpayers could defer taxes and avoid the extra premium on $600 of income by making a contribution to a registered retirement savings plan. Some, Drummond suspects, will merely avoid reporting some income.
He said the government would have avoided the perverse marginal tax rates by applying a surtax, as is done at higher incomes.
Apart from these troubling points, Ontario will not hit low-income earners as hard with health premiums as Alberta and British Columbia.
Provincial revenue officials say more than half the $2.4 billion in annual health premiums will be borne by taxpayers with a taxable income of more than $50,000. More low-income earners will avoid the premium here than in other provinces.
In Alberta, a single earner pays $528 in premium once as his or her taxable income reaches $15,970. In British Columbia, the maximum of $648 per single taxpayer starts at $24,001.
So an individual taxpayer in Ontario will not pay more than in Alberta unless his or her taxable income is more than about $48,300, and not more than in British Columbia unless income exceeds $72,000.
Spouses who each report $25,000 of annual taxable income would pay a total of $600 in premium, compared with $1,056 in Alberta and $1,152 in British Columbia.
In addition to the health premium, high-income earners are hit by a surtax that was originally called the Fair Share Health Care Levy.
The name disappeared in 2000, but the surtax remains. It's 20 per cent of provincial taxes on employment income between $60,774 and $71,044, and 56 per cent of provincial taxes beyond that. |
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