It’s time to end secret income tax hikes in Manitoba – yes, the ones you probably don’t even know you’re paying.
Secret tax hikes you ask? Here’s a quick briefing on the issue.
Imagine back in 1950 that your uncle handed you 10 cents and said “have a soda on me kid.” Back in the day that would have been a nice gesture.
However, if he handed you 10 cents in 2011 and said the same thing, you would lose out as your uncle’s gift amount didn’t rise with inflation.
Similarly, if the government doesn’t adjust benefits and tax brackets for inflation in the tax system, you also lose out.
Note that back in 1999, the government allowed people to earn $6,794 before paying income taxes. However, today that threshold is only $8,384. We use the term “only” as $6,794 in 1999 dollars works out to $8,522 in today’s dollars.
Thus, if governments had kept our tax system indexed for inflation all these years, you would be able to earn at least another $138 before paying provincial income taxes. Because they didn’t automatically index that threshold (known as the basic personal amount) they’ve been able to erode that benefit and charge you more in taxes.
The same problem occurs with tax brackets.
Back in 1999, the Manitoba government began charging taxpayers the second highest income tax rate at $29,590 of income. Now had that $29,590 tax bracket increased for inflation, you wouldn’t pay the second highest tax rate until your income hit $37,116 this year.
Unfortunately, the provincial government has only increased it to $31,000. Thus, they start charging you the second highest tax rate (12.75 per cent) when your income hits $31,000 instead of waiting to charge it when your income hits $37,116.
This hidden form of tax increase is known as “bracket creep” and, due to its unfairness, it has been eliminated by seven of the ten Canadian provinces. Manitoba of course is one of the holdouts.
If you earn $40,000 or more this year, bracket creep will cost you an extra $134 dollars in income taxes. Again, that’s only going back to 1999. If you earn $75,000 this year, bracket creep will cost you an extra $470 in income taxes. You can see how this stealth tax hike can really add up.
Now guess what does go up automatically for inflation each year? If you guessed “politicians expense accounts” you would be right. But don’t stop there. When the Doer government introduced a new plan to give more tax dollars to political parties a couple years ago, they also wanted those amounts to rise automatically with inflation each year. Talk about priorities.
Thankfully, the Liberal party indicated during the election campaign that they would end bracket creep.
But where are the other two parties on this issue? Are they going to secretly raise income taxes on Manitobans again next year or are they going to do the right thing and finally end this stealth form of taxation?
One thing is for certain, now is the time to pressure vote-hungry politicians to address this issue. Hopefully you can help us convince them to do just that.
Colin Craig is the Prairie Director for the Canadian Taxpayers Federation
