SprottWealth Insights

What does the Liberal majority win mean for you?

On October 19, 2015, Justin Trudeau and the Liberal party made history, winning a landslide majority government in dramatic fashion when Canada resoundingly voted out Prime Minister Harper after nearly a decade at the helm. It was a stunning turnaround for the Liberal party, which enjoyed the greatest increase in seats between elections in Canadian history – going from only 34 seats in the last election, to 184 seats this time around1. Mr. Trudeau ran his platform largely on promises to give income tax cuts to the middle class, raise taxes on higher-income Canadians, and to increase infrastructure spending by running three years of budget deficits. Trudeau’s majority government will take the reins at a time when Canada’s economy has been significantly impacted by a commodities slowdown. Here we’ll take a look at how this election may affect your financial planning, and offer a few suggestions you may find helpful.

The highlights of Mr. Trudeau’s platform promises include:


Liberal Platform

Personal Tax Rates[2]

  • Tax cuts for middle class - from 22% to 20.5%
  • Tax increase for high-income earners - from 29% to 33%

Infrastructure Spending

  • Run 3 consecutive years of budget deficits in order to increase infrastructure spending
  • Balance budget in 2019-2020 fiscal year

Tax-Free Savings Accounts (TFSA) limits

  • Reverse 2015 increase - reduce contribution limit from $10,000 to $5,500 per year

Universal Child Care Benefit (UCCB)

  • Eliminate UCCB and replace with Canada Child Benefit

Old Age Security

  • Maintain age of eligibility (65 years)
  • Increase Guaranteed Income Supplement for single low-income seniors by 10%
  • Introduce Seniors Price Index
  • Enhance compassionate care benefits

Canada Pension Plan (CPP)

  • Meet with provinces within first 90 days to consult on increasing CPP benefits

Employment Insurance (EI)

  • Reduce EI premiums from $1.88 per $100 to $1.65 per $100 starting in 2017
  • Reduce waiting time for people who apply for EI
  • Eliminate rule requiring anyone entering the workforce to work a minimum of 910 hours before becoming eligible for EI

Let’s explore a few of these promises in greater detail.

Personal Tax Rates

Trudeau has promised tax cuts to help the middle class. It is expected to be the first piece of legislation that the new Liberal government introduces. Those earning between $44,701 and $89,701 would see their tax rate lower from 22% to 20.5%. This tax break for the middle class would be worth about $670 per person, per year.[3] To balance these cuts, anyone earning over $200,000 annually would see a tax rate hike from 29% to 33%.

These changes are meant to be revenue neutral – the revenue lost by giving tax cuts to the middle class (projected at $3 billion) would be offset by revenue derived by raising rates for high-income earners (projected at $3 billion). Time will tell whether the revenues earned through the rate hike will be adequate to offset the revenue lost through the cuts, or whether the equation will be thrown off by high-income earners seeking out new tax management strategies.

Implications for you

  • Now is the time to talk to your accountant about tax management strategies for 2016, and to your advisor about investment strategies that may provide greater tax efficiency.
  • Because the benefits from income splitting are also expected to be reduced or eliminated, proactive tax planning becomes an even more urgent requirement for 2016.

Infrastructure Spending

The centerpiece of the Liberals’ economic plan is to stimulate the economy with more public spending. To do this, the Liberals have pledged to nearly double federal infrastructure investment to almost $125 billion over the next decade, with the goal of balancing the budget by 2020. The additional investment amounts to $20 billion over each of the next 10 years, targeting public transit, social infrastructure and green infrastructure initiatives. The key here is how efficiently and effectively the money will be spent and how well key stakeholders will be motivated to support the program. Possibly in response to such concerns, Trudeau has sanctioned the creation of a “Canada Infrastructure Bank” which would provide loan guarantees and small capital contributions to provinces and municipalities to ensure projects are built.[4]

Implications for you

  • Many experts are expecting the Liberal’s infrastructure investment program to have a modest effect on Canada’s economic growth in the short-term. Not surprisingly, many believe that global resource demand will have a much more dramatic effect on Canada’s economy in the short-to-medium term.
  • Speak to your financial advisor about how to best mitigate the possible effects of a protracted resource downturn.

Tax-Free Savings Account (TFSA) contribution limits

In 2015, the TFSA contribution limit was increased from $5,500 to $10,000 and the Conservative government ended indexing to inflation. The Liberals have pledged to roll back the TFSA limit to $5,500. A significant majority of Liberal supporters and dissenters are unhappy with the decision. However, the Liberal party will move forward with the rollback, claiming that reversing the increase will save the federal government $1.05 billion over the next four fiscal years.[5]Since the Liberal government plans to restore the $5,500 limit, they are expected to reintroduce indexing. The timing of these TFSA changes has not been yet been determined. 

Implications for you

  • You may want to consider maximizing your contributions to your TFSA by December 31 of this year. Talk to your financial advisor to find out what is best for your situation.

Universal Child Care Benefit (UCCB)

The Liberal Government has promised to get rid of the Universal Child Care Benefit and replace it with a new income-tested, tax-free Canada Child Benefit that is delivered monthly. It is meant to provide greater support to single-parent families and low-income families.


Justin Trudeau was officially sworn in as Canada’s 23rd Prime Minister on November 4, 2015. The Liberal party made a lot of promises during their gutsy campaign that will affect Canadians’ finances. Many of the proposed changes have the potential to materially affect your financial plans. Be sure to book some time with your advisor to ensure that you and your family are well-positioned as many of these promises become policy over the next 12 months.

1 Globe & Mail
2 Grant Thorton
3 Liberal.ca
4 Journal of Commerce
5 The Star