No doubt your tax dollars will be used in the coming months to pay for government ads to promote the recent provincial budget.

When you see the ads, here’s what you need to keep in mind about the personal income tax changes the ads will no doubt trumpet.

First, if you pull out the 2007 budget, you’ll see the government committed on page C4 to bring in modest personal income tax relief over a four year period. By 2011, the government committed to reduce the lowest personal income tax rate from 10.9 per cent to 10.5 per cent. The budget also committed to raise the middle tax bracket from $30,544 to $35,000 and the highest tax bracket from $65,000 to $70,000.

In plain English, it was a pretty modest income tax relief schedule, but at least it was a plan.

Today the lowest personal income tax rate is 10.8 per cent and the middle and upper tax brackets are $31,000 and $67,000 respectively. In other words, the government has fallen far short of its commitment.

You see, their 2007 income tax relief plan was cancelled in 2009 without any communication from the government about the move.

What the government is communicating is the 2011 budget’s new four year “commitment” to increase the basic personal exemption by $1,000.

The new plan has obviously left many asking – “why should we trust their new plan if they cancelled their old plan and didn’t tell anyone?”

Another thing the government won’t tell you is that they’re actually increasing your personal income taxes at the same time they claim to be decreasing them.

You see, Manitoba is one of three provinces in Canada that doesn’t protect taxpayers from inflation in the tax system. It’s a technical thing known as “bracket creep” and here is an example.

In 2007, the middle tax rate (12.75 per cent) applied to any income you earned over $30,544. Had the NDP government automatically increased that threshold for inflation, as most provinces do, the threshold would have automatically increased to $32,319 for 2011. That’s much higher than today’s level of $31,000.

As a result, $1,319 of your income is taxed at the middle rate of 12.75 per cent instead of the lower rate of 10.8 per cent. That’s good for a tax increase of $26 per year.

If you calculate the overall impact of bracket creep since the NDP took over in 1999, it’s costing those who earn over $37,116 about $134 annually. If you earn over $74,232, it costs you $470 annually. Of course the annual cost of bracket creep rises each year the problem isn’t fixed.

If that doesn’t make your blood boil, then perhaps this will.

Guess what the government does increase, automatically, each year with the inflation rate? If you guessed “the amount of money politicians have in their expense accounts” you would be correct.

Now the key is to channel that frustration and do something useful. Spread this column around and educate your friends, colleagues and family members as to what’s happening. If people like you don’t start spreading the word, then we’ll be talking about this problem again next year. 

By: Colin Craig
Posted: April 20, 2011
Topic: Manitoba

Contact the regional director Colin Craig for further information.

Type: Commentary

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