Earned $40,000 in 1998 You paid over $1,300 in extra tax last year. And sorry to further depress you around tax time, but if that was your salary for the last decade, you paid over $8,000 in extra tax since 1988 due to "bracket creep" taxation. And how's this for a head-spinner: If you'd invested those extra tax dollars instead of sending them to Ottawa over the past decade, an average 8% rate of return would give you a retirement nest egg of over $106,000 thirty years from now.

Sound hard to believe Think again. Here's how the politically approved scam works: The basic personal exemption was $6,456 for most taxpayers in 1998. If it had been fully indexed for inflation since 1988, it would have been $7,991. That means Canadians paid 17% federal tax (plus provincial tax) on the $1,535 difference between what the exemption was and what it should have been. It also works the same way for other tax bracket thresholds. The middle income tax bracket is set at $29,590 for 1998. Fully indexed for inflation since 1988, it would be $36,624. You're paying 26% federal tax (plus provincial tax) on that $7,034 difference - as opposed to the 17% tax (plus provincial) that you would have paid had it been inflation-indexed. And on it goes.

Bracket creep taxes produce windfall tax revenues for governments. According to the CD Howe Institute, over $10 billion in extra federal income tax went to Ottawa (just last year) because of the decade-long effects of bracket creep, never mind the additional provincial take. All that extra tax money came from somewhere, i.e. - your pocket. Assuming a constant $30,000 income since 1988, that Canadian sacrificed over $3,200 in extra tax to Revenue Canada over the past decade. At $75,000, you paid out $11,916 in extra tax since 1988. Enjoy filling out your tax return yet It gets worse.

Let's pretend politicians fully indexed your tax brackets for inflation since 1988, and instead of paying the above-mentioned money to Revenue Canada, you invested it instead. (Assume an 8% rate of return on your money - a conservative rate of return. The Toronto Stock Exchange 10-year average was 9.2% between 1989 and 1998. The 30-year average is 10%.) The $3,254 extra tax paid by a $30,000 income since 1988, invested instead, would be worth $9,593 in ten years, $20,710 in twenty years and $44,713 in 2029. Your taxable income was $40,000 between 1989 and 1998 Invested in a decent mutual fund instead of Ottawa, your $8,094 in extra tax would've produced $22,794 in 2009, $49,212 twenty years from now, and $106,246 by 2029. A $75,000 salary sacrificed $11,916 in extra tax thanks to bracket creep over the last decade. That would have brought returns of $33,559 by 2009, $72,451 two decades from now, and $156,417 in 2029.

By the way, don't forget that those numbers are conservative, and none of them include the extra bracket creep taxes you're already paying in 1999, or the extra tax you will pay in 2000, 2001, ad infinitum, unless Ottawa and the province re-index your tax brackets for inflation.

Bracket Creep: Call it the tax that keeps on growing, and growing, and well, growing. Want to stop this automatic tax increase Call the Federation at 1-800-772-9955. We'll give you a copy of our bracket creep study and the names of some politicians you might like to speak to about this.