$12 Billion Tax Hike in 1999
-- CTF Releases Major Study: The ABC's of Bracket Creep --
OTTAWA: The Canadian Taxpayers Federation (CTF) today revealed that in 1999, Canadians will pay an extra $10 billion to the federal government and another $2.5 billion to the provinces in automatic personal income tax hikes known as bracket creep, despite modest one time tax relief in the 1999 federal budget. The total federal & provincial impact of bracket creep in 1999 on a Canadian making $40,000 a year is $1,324.76.
"It's doublespeak to suggest that Canadians are enjoying tax relief as a result of last week's budget when the cumulative impact of bracket creep is still with us," said CTF federal director Walter Robinson.
"To correct for the cumulative effects of bracket creep on the Basic Personal Exemption (BPE), Paul Martin should have raised the basic personal exemption (BPE) to $8,071, almost a full $1,000 more than where the BPE will be by July 1st, " said Robinson. "And we haven't even begun to talk about the income threshold changes that need to be made to the income tax brackets at 26% and 29%."
Bracket creep is a federal tax policy that allows tax brackets, exemptions, and credits to lag behind inflation. It works by over-exposing your inflation-driven income to an income tax system that is only partially indexed to inflation. The result is a steady increase in the amount of income taxes netted by Ottawa and the provinces.
- Ottawa will net $10.1 billion extra in income taxes owing to impact of partial indexation from 1986 to 1999.
- The provinces will net another $2.5 billion in 1999.
"This automatic, hidden tax is still with us. During Paul Martin's tenure as Finance Minister, personal income taxes as a percent of GDP have increased from 7.1% to 8.3%, an increase of 17%.added Robinson. "And the most troubling thing is that at least half of the 600,000 people Mr. Martin claims that he has removed from the tax rolls in 1998 and 1999 will be sucked back onto these same rolls by bracket creep in the next two years. This regressive tax policy punishes the poorest in our society and borders on immoral."
The Chart shows the taxes that would not be owed in 1999 had the income tax system been fully indexed to inflation since 1986.