Although the CTF convinced the feds to end a hidden form of taxation knowns as "bracket creep" back in 2000, taxpayers in Manitoba, Saskatchewan, Nova Scotia and PEI are still feeling the pinch.

However, what's worse is when one considers the impact of bracket creep over the past century; something that hurts all taxpayers nation-wide.

If you're wondering what in the world bracket creep is, it occurs when governments don't automatically adjust the income tax system for inflation each year.

In short, consider how you can't buy as much with $100 today as you could twenty years ago. That of course is due to inflation. Well, if the government doesn't increase the value of tax benefits and tax brackets in the income tax system for inflation, then you also lose out.

As noted, the feds began indexing the tax system back in 2000, but here we are in 2011 and Manitoba, Nova Scotia and PEI still haven't made the taxpayer-friendly change.

As a result of inaction since 1999, bracket creep is costing Manitoba taxpayers with incomes over $40,000 approximately $156 per year. For those with incomes above $75,000, it's costing a whopping $482.

It's bad enough the Manitoba government hasn't protected taxpayers' incomes for inflation in the tax system, but what's worse is that Manitoba's MLA's did decide to index their expense accounts for inflation at some point. Talk about a slap in the face to taxpayers!

To educate Manitoba taxpayers about the problem and hopefully gain momentum to fix it, the CTF created this video blog on the issue. For more information on bracket creep in Manitoba you can also check out this link or sign our petition to push the government to address the problem.

Saskatchewan on the hand, fixed the problem back in 2004...or so we thought. That was the year the Sask government indexed the income tax system for inflation. But last year the CTF discovered the system was indexed for the federal inflation rate, not the provincial inflation rate.

Why does that matter? Because the provincial inflation rate has exceeded the federal rate seven times in the last nine years. Translation - if that trend continues over the next nine years, it'll cost you more in taxes. See this link for more information.

But what's worse is when you consider the effects of bracket creep on all taxpayers in Canada over the past century.

Consider that when income taxes were introduced back in 1917, the Basic Personal Exemption was $1,500. You can't buy much with $1,500 today, but back in the day, that was a lot of money!

In fact, it's a fair chunk of change in today's dollars too. Visit the Bank of Canada's inflation calculator and plug in "$1,500" in the "basket of goods and services that cost" box and "1917" in the box for the year.

For 2010, had the basic personal exemption kept pace with inflation, it would be a whopping $21,493! That's $11,111 higher than the current level of $10,382.

So what does that mean to you?

Well, the overtaxation amount differs province by province, but the federal amount alone is approximately $1,666.

Combined with the provincial overtaxation amount, years of not indexing the tax system is costing Saskatchewan taxpayers a whopping $2,561 every year. For Manitoba taxpayers, it's even higher - $3,108!

With provincial elections coming up and a federal election constantly on the horizon, this is one issue you might want to bring up with a candidate that knocks on your door. 

By: Colin Craig
Posted: January 18, 2011
Topic: Manitoba

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