Canada's $27 billion gift for taxpayers: New Cabinet announces major tax cut for 22 million middle-class

Following the swearing-in of a new cabinet, the Canadian government has announced a major personal income tax cut as a top legislative priority for the new parliamentary session. The measure will reduce the lowest marginal tax rate from 15% to 14%, effective July 1, 2025.

The tax cut is expected to benefit nearly 22 million Canadians. According to government estimates, two-income households could save up to USD 840 annually by 2026. Over five years, the plan is projected to deliver more than USD 27 billion in tax relief.

Finance Minister and Minister of National Revenue François-Philippe Champagne announced the measure as one of the first orders of business for the new Parliament. “This tax cut will help hard-working Canadians keep more of their paycheques to spend where it matters most,” said Champagne. “Every Canadian should be able to afford necessities, feel secure, and get ahead financially—and this tax cut will help them do just that.”


Prime Minister Mark Carney echoed the message, posting on X (formerly Twitter): “Canada’s new cabinet met for the first time this morning. One of our first orders of business: a tax cut for the middle class. Starting July 1, hard-working Canadians will keep more of their paycheques.”

He added, “Last month, Canadians called for change—to bring down the cost of living and put money back in their pockets. My government will deliver that change.”

To implement the tax change, the Canada Revenue Agency will update its payroll deduction tables for the second half of 2025. This will allow employers to reduce tax withholdings starting July 1. As income is reported annually, the blended tax rate for 2025 will be 14.5%, with the full 14% rate applying from 2026 onward.

The tax relief is primarily aimed at middle- and lower-income Canadians. The bulk of savings will go to individuals earning under USD 114,750 in 2025, with nearly half of the benefits directed to those in the lowest bracket (USD 57,375 or less).

Champagne underscored that the move is also part of a broader strategy to support economic resilience amid global trade and tariff uncertainties. “We are setting the stage for growth by helping Canadians keep more of what they earn,” he said.