Canada’s new Liberal government is readying itself – to honour its campaign promise on taxes.

Federal income taxes for middle earners will be cut – while the richest Canadians will kick-in more.

And Finance Minister Bill Morneau is conceding for the first time – that the changes will cost the federal treasury $1.2 billion a year – starting in the 2016-17 fiscal year.

A motion has been introduced that would see the Trudeau government lowering the income-tax rate on Canadians earning between $45,282 and $90,563 per year – to 20.5 per cent from 22 per cent.

The move is to take effect starting January 1st.

To offset most of that change the Liberals are also imposing a higher tax rate of 33 per cent – on earners in the top one per cent – Canadians who earn  more than $200,000 per year.

The changes also include cancelling a Conservative plan to increase limits on tax-free savings accounts – from $5,500 to $10,000.