Bracket creep is dead, long live tax cuts! - read headlines on the federal budget. In World Wrestling Federation-speak, federal Finance Minister Paul Martin laid the proverbial "smack down" on bracket creep - a menacing income tax policy that pounded an extra $90 billion out of Canadians in the past decade.

Now that Budget-mania is coming soon to the province, it's time for Finance Minister Greg Selinger to lay a smack down of his own and pin bracket creep down for the three count.

The recent move by the province to divorce its income tax system from Ottawa allows Selinger to levy personal income taxes directly on taxable income, rather than on basic federal tax.

Now that Manitoba has jettisoned from Ottawa's income tax orbit, the so-called $58 billion federal tax cut will no longer beget a $51 million provincial tax cut. The reversal of fortunes shows how NDP ideology is creeping into their tax policy.

Manitoba taxpayers would be more inclined to support the NDP's decision to de-link from the Ottawa if and only if the following conditions were met:

De-linking should favour taxpayers, not bureaucracies. All federal tax cuts that would have accrued to Manitoba taxpayers under the old calculation method should be restored through provincial tax cuts. In the case of the latest federal budget, that translates into $50-million;

End provincial bracket creep by fully indexing and restoring personal income tax brackets and credits to inflation; and,

Eliminate the 2 percent flat tax and the 2 percent surtax.

Lower taxes will stimulate economic growth, create more jobs and ultimately generate more revenue for the province to dedicate to debt reduction and greater tax relief.

Count on Selinger to follow Martin's lead and take a token swing at provincial bracket creep. But don't expect him to fully restore the brackets and credits to optimum levels.

Martin's upwardly mobile tax brackets are much higher than last year but nowhere near where they should be. The higher the bracket threshold, the greater share of your income is taxed at the lower rates.


To set himself up for the knock out punch on provincial bracket creep, Selinger must fully restore the tax brackets and credits to their full inflation-driven levels. The basic personal exemption would have to rise this year from $7,131 to $8,192, effectively taking many low-income earners off the tax rolls. The middle income tax bracket would move from $29,590 to $37,545, and the high bracket from $59,180 to $75,091, translating into considerable savings.

To max-out political gain with the least revenue pain, Selinger can sissy punch bracket creep by simply raising the brackets and credits by this year's inflation rate and disregard the past 14 years of inflation.

To the untrained eye, it would appear as though Selinger had curb-stomped bracket creep. But the miniscule $10 million savings would barely register on the tax cuts radar.

However the NDP decide to tackle bracket creep, it should never be chalked up as a tax cut. By re-indexing the tax brackets and credits, neither Selinger nor Martin can take credit for actually cutting those taxes. Instead they preempt taxes from automatically increasing. At best it's preventative tax-relief, but not a tax cut.

Budget 2000 could be the death kneel for provincial bracket creep. Whether it's full or partial restoration of brackets and credits, governments have had to come to terms with 14 years of tax pillaging. The ship has been steered in the right direction. Now it could use some wind behind its sails.