As government watchdogs ourselves, we’re generally glad for the help we get from other groups interested in ensuring that the folks we elect to run things are doing a good job.
One of those groups,a prominent one, is the Canadian Taxpayers Federation.
Although we sometimes find their single-minded focus to be repetitive — not every tax rate should be zero — they undoubtedly benefit from the ability to hammer away at a single point and drive it home.
However, you’d think that such a single-minded focus should lead to clarity.
Their latest release, which you’ll read about in today’s paper, shows that this is not always the case.
In fact, although it purported to be a numbers-heavy data analysis, the choices that the CTF made in calculating and presenting their data seriously undercut their argument.
Their biggest misstep is in pretending that income taxes in Manitoba are going up.
“Manitobans are going to see small income tax increases,” CTF Prairie director Colin Craig said in the release.
Now, it’s true that, because Manitoba doesn’t index its income tax brackets to inflation, a person who gets annual cost-of-living wage increases can eventually find themselves bumped into a higher tax bracket, even though their standard of living hasn’t increased at all.
That’s a well-known phenomenon known as bracket creep.
But those “tax increases” that Craig refers to first rely on cost-of-living wage increases — something that a large number of Manitoban workers would love to get, but don’t.
In the CTF’s analysis, a worker making $35,000 in Manitoba (close to the median income in Brandon) will pay an extra $186 in taxes next year.
But that’s assuming that the same worker gets a raise next year, too. Some $160 of the tax increase is due to that assumed cost-of-living wage increase. Pardon us for pointing this out, but a recent Statistics Canada report says that the average raise in Manitoba was less than $19 a year (just 36 cents a week).
Even going by the CTF’s own assumptions, that worker’s effective tax rate (taking into account multiple brackets and taxes like the CPP and EI) is 22.8 per cent. That’s both this year and with next year’s apparently hefty raise.
After stripping out all the other taxes, the CTF says that this worker will be hit by a bracket creep of $34 — the secret tax increase that Manitoba is apparently trying to slip past you.
Well, that doesn’t look like a big, scary tax hike to us. Especially since it only comes into effect once (if) you get a raise.
Manitoba is joined by P.E.I. and Nova Scotia as the only provinces that don’t index income tax rates to inflation.
It wouldn’t necessarily be a bad idea to do so, though there are downsides. Some economists quibble with the accuracy of the various inflation numbers, for example. And it risks putting tax rates on autopilot. The continual need to adjust tax brackets due to inflation offers regular opportunity to examine the tax code altogether — something we’d think the CTF should be in favour of.
And if tax rates need to be put on autopilot in the first place, we wonder why they should be indexed to price inflation. Why not index them, say, to increases in median income?
At any rate, we cannot say that we are happy with the current state of affairs in Manitoba, which remains one of the higher-taxed provinces in Canada.
And we understand that the allegations of a stealth tax hike carried out in secret makes for gripping headlines.
But for us, the real concern isn’t a median-wage worker paying an imaginary $34 more in “bracket creep” taxes next year. It’s that same worker, getting a very real, very paltry 36 cents per week raise.
Republished from the Brandon Sun print edition December 31, 2013