The easy part of Ontario tax reform begins on Jan. 1 -- most people in the province will see an income tax cut.

Here's how those cuts will play out:

  • $35,000 salary - $239 annual tax cut
  • $75,000 - $246 annual tax cut
  • $100,000 or more - $236 annual tax cut

CTV Toronto's Paul Bliss reported that if you get paid biweekly, you'll see an extra $10 on your paycheque. However, you might not see it for very long because federal CPP contributions are set to rise in January.

"But what we know is that the overall benefit of this package of tax reforms will create jobs, it will improve investment opportunities and lower costs on many goods," Finance Minister Dwight Duncan told reporters at Queen's Park earlier this month.

However, there is another shoe to drop on July 1. The 8 per cent provincial sales tax will become harmonized with the five per cent GST to create a 13 per cent HST. As a result, many goods and services not previously subject to a tax will now cost an extra eight per cent.

The following exemptions apply:

  • books, children's clothing and footwear, children's diapers, children's car seats and car booster seats, and feminine hygiene products.
  • qualifying prepared food and beverages that are ready for immediate consumption if the total price for all qualifying items purchased, excluding HST, is not more than $4
  • Qualifying items will include: food or beverages heated for consumption; salads; sandwiches and similar products; and platters of cheese, cold cuts, fruit or vegetables and other arrangements of prepared food.
  • The NDP and Progressive Conservatives have both vigorously opposed the tax change, saying it will cost an average family an extra $1,500 per year.

Some goods and services that will see their tax rate go up include:

  • natural gas
  • gasoline
  • fuel oil and other fuels
  • tobacco
  • certain fees on financial products and services
  • Internet access
  • some non-shelter services such as cleaning and landscaping
  • personal care and professional services
  • taxi rates

The Tories have termed it the Dalton Sales Tax while the NDP call it the Hated Sales Tax.

But in December, a left-wing think tank released a study saying the HST wouldn't be a tax grab when you look at it in the context of the government's overall tax reforms.

The Canadian Centre for Policy Alternatives said new property and sales tax credits, which are comparable to those for the GST, combined with income tax cuts should make the HST relatively revenue-neutral:

  • families with incomes of between $30,000 and $90,000 shouldn't be affected by more than $50 to $75 per year either way
  • while the tax will collect $3.5 billion in sales tax by the CCPA's calculations, it will also pay out $1.1 billion in sales and property tax credits and $2.3 billion in income tax cuts for an "aggregate tax liability" of $133 million
  • low income people who do not file income tax returns will be hurt because they won't be eligible for the credits or tax cuts.

"The negative impact of the HST increases as income rises. Rich people spend more money than do the poor and, as a result, rich Ontarians will pay more sales tax," the report said.

In June 2010, just before the new tax kicks in, the government will send out the first in a series of three cheques for individuals with incomes of less than $80,000 or family incomes of less than $160,000.

Another will come in December 2010 and the final one in June 2011. Ontarians will go to the polls in October 2011.

"I would classify them as one-time bribes," Progressive Conservative MPP Peter Shurman said. "Tell me that you're going to send me that cheque every single year for the rest of my life, and maybe we have a discussion point."

NDP Leader Andrea Horwath added: "Families are still going to be out of pocket on a day-to-day basis come July 1, when the harmonized tax is implemented."

The federal Conservative government gave the Ontario government $4.3 billion to ease the harmonization process. Parliament passed the implementation legislation, as did Queen's Park. So the HST, born in the March 26 provincial budget, will soon be the law of the land.

With a report from CTV Toronto's Paul Bliss