Letter to the editor — Bracket creep: not-so-bitter medicine
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I’m somewhat disappointed that you ran the piece bracket creep, “Bracket creep is a stealthy tax increase,” by Gage Haubricht, The Brandon Sun, July 29.
Bracket creep is a real thing, and it is in fact what he describes: the brackets do not increase with inflation and cost of living. But the author states that the average taxpayer will “lose” money by this, should they receive a cost of living adjustment.
The reality is that no one “loses” anything. Manitoba has a progressive rate, meaning you only pay the higher amount of taxes for the amount of income earned over the bracket amount.
To use his example, if the bottom of the next tax bracket was $60,001 and someone made $60,000 and received a modest $2,000 increase, the higher tax rate would only apply to $2,000 of their income. The rest would continue to be taxed at the lower rate. The rest of the money is theirs to keep.
In the end, the amount of extra tax paid is fairly minimal. Manitoba has three brackets for income tax: those earning under $15,780 pay no tax, with increases at $47,000 and $100,000. This is for individual taxpayers, not household income. So the problem described by the original author is really only a problem for taxpayers just below thresholds.
The original author does not make any of this clear. The way he presents the information makes it sound like there would be a net loss and would be understood in that way by individuals who do not understand how progressive taxation works.
This is a common talking point by conservative pundits, historically used to discourage people from asking/accepting wage increases, arguing that they would somehow earn less money by getting a higher base wage.
The reality is, that while no one likes to pay taxes and bracket creep does result in a net increase of taxes collected by the government, it will not impact the vast majority of taxpayers and it will not result in the “loss” of income. It’s a less painful way to raise more revenue over a few years because it’s already coming out of an increase in income.
It is not sustainable long-term; eventually the brackets will need to be adjusted to match inflation and cost of living. But in the short term, it’s one of the better-tasting doses of bitter medicine.
Carolyn Markmann
Brandon