Disability advocacy groups are urging the federal Liberal government to revise a proposed tax bill they say could unintentionally raise costs for people with disabilities—despite the bill’s broader aim of cutting taxes for most Canadians.
The legislation, which passed first reading earlier this month, proposes reducing the lowest federal marginal tax rate from 15 to 14 per cent. While this would lower taxes for many Canadians, organizations like Inclusion Canada and March of Dimes Canada say the move could shrink key tax credits for low-income people with disabilities, leaving them worse off.
That’s because the disability tax credit is calculated using the marginal tax rate—meaning a reduction in the rate also reduces the value of the credit. For many, that change could mean paying more to the Canada Revenue Agency at tax time.
“We’re really hoping this is something that will be remedied, but as of yet we’ve not had a response,” said Krista Carr, CEO of Inclusion Canada. She noted that the proposed change could cost low-income Canadians with disabilities roughly $100 a year—money many already struggle to spare.
March of Dimes echoed the concern, saying that families raising children with disabilities could lose an average of $156 per child annually due to the adjustment in credit value.
The Liberal government has promoted the tax cut as a financial win, claiming it would save two-income families up to $840 a year beginning in 2026. It also highlights the new Canada Disability Benefit, which will provide eligible Canadians up to $2,400 annually starting this July. But Carr stressed that tax credits are essential for covering the extra costs of living with a disability—expenses that the benefit may not fully offset.
Carr has proposed a targeted fix: maintain the 15 per cent rate specifically for calculating disability-related tax credits, even while the general rate drops to 14 per cent.
Nicholas Taylor, a 39-year-old from Cooks Brook, Nova Scotia, knows firsthand how significant the impact could be. Taylor, who has polyneuropathy and uses a wheelchair, said the potential $100 increase in taxes would wipe out a full month’s worth of his diabetes-related medical supplies. With only $12,000 in annual income and roughly $450 paid in taxes, Taylor says the change would amount to a 25 per cent increase in his tax bill.
“That’s a real burden,” Taylor said. “We need people with disabilities to be consulted before policies like this are brought in.”
So far, the federal Finance Department has not commented on whether it plans to revise the bill. Advocacy groups say they’ll continue pressing for changes to ensure that a tax cut for most Canadians doesn’t become a tax hike for some of the country’s most vulnerable citizens.