Canadians could see their overall tax burden rise in 2026, according to a new analysis from a national taxpayers’ advocacy group, despite the federal government’s plans for targeted tax cuts.
The Canadian Taxpayers Federation (CTF) says that although some income tax reductions are scheduled, increases to payroll deductions and other federal levies are likely to outweigh those savings for many families.
A key change is the planned reduction to the lowest federal personal income tax bracket. The government has promoted the cut as a measure to improve affordability for lower‑ and middle‑income earners. The CTF, however, argues that any benefit will be modest once other tax‑related cost increases are taken into account.
Payroll taxes are set to climb in 2026, with higher Canada Pension Plan (CPP) and Employment Insurance (EI) contributions. These mandatory deductions affect most workers and are split between employees and employers. According to the CTF, the combined increases could cost individual workers several hundred dollars over the year, reducing disposable income.
The report also points to the ongoing effects of carbon pricing. Although the consumer carbon tax was removed in 2025, the industrial carbon price remains and is scheduled to rise again in 2026. The CTF contends that businesses pass these costs on to consumers through higher prices for goods, services, and transportation, adding to inflationary pressures.
Another expected increase comes from federal alcohol excise taxes, which automatically adjust each year based on inflation. This means beer, wine, and spirits are set for another tax hike in April 2026, affecting both consumers and hospitality businesses.
CTF federal director Franco Terrazzano says the combined impact of these measures means Canadians should not anticipate meaningful tax relief next year. He argues that government revenues are growing more because of higher taxes and mandatory contributions than from economic expansion.
The federal government, meanwhile, defends its approach, highlighting targeted tax cuts and social programs aimed at affordability and economic stability. Officials also emphasize that CPP enhancements are designed to strengthen long‑term retirement security, framing payroll contributions as investments rather than traditional taxes.
Critics maintain that with many Canadians already facing high housing costs, rising food prices, and elevated interest rates, additional deductions and indirect taxes will further strain household budgets.
As 2026 nears, the CTF is urging the federal government to broaden tax relief and rein in spending growth, warning that without changes, Canadians will continue to feel the effects of an increasing overall tax load.
