Recently the CTF wrote to Finance Minister Paul Martin urging him to end "bracket creep" (the effect where the tax system lags behind the cost of living) in his forthcoming budget.

There is an overwhelming national consensus in support of this move for Budget 2000. From editorials to opposition parties to advocacy groups (from the traditional left and right) to organized labour; all agree that the tax system should be fully re-indexed for inflation.

However, spindoctors and some Martin advisors discount this consensus. They ask if taxpayers don't understand the effects of partial de-indexation, why correct it Well, they're dead wrong. Bracket creep has crept into the political lexicon in newspapers, television and talk radio. Taxpayers clearly understand that bracket creep has exposed more of their income to higher taxes and eroded the value of any tax credits they receive.

It's not hard to figure out. You get a raise to keep pace with inflation year after year but your tax basically cancels out the raise. Yet, the price of goods and services continues to rise but you're left with the same income you always had. Bottom line, you're making more, but buying less.

So what would the consequences be if Paul Martin decides to re-index the tax system to inflation In short, a real win-win-win scenario, whatever way you measure it.

Fiscal Consequences: If annual inflation remains constant at 1.5%, the impact (loss of revenue) to the treasury would be $900 million. In year two, $1.8 billion, year three, $2.7 billion, etc. This is trivial when you consider that the government plans to record surpluses of $5.5 billion, $8.5 billion and $12.5 billion over the same three-year period. This is easily affordable.

In addition, the government already plans to index future program spending to inflation. It is only fiscally fair that taxpayers are not hit with the double whammy of more spending and declining real incomes.

Social Consequences: It's great social policy. Millions of low- and middle-income Canadians have seen the real value of credits such as the refundable GST credit, the age credit, or the child tax benefit erode due to bracket creep. Over 3.5 million Canadians have been pushed onto the tax rolls or into higher tax brackets due to bracket creep. Ensuring that low income Canadians are allowed to keep as much of their hard earned and precious dollars in their pockets as possible is fundamental to keeping demand for welfare assistance and entitlement schemes to a minimum. (Read: lower costs for all taxpayers.)

Political Consequences: Apart from the no-brainer fiscal and social reasons for ending bracket creep, the political benefits for the Finance Minister are equally compelling.

Ending bracket creep moves the fiscal policy debate from tax cuts to fundamental tax reform. It would be a legacy initiative credited to Mr. Martin. In addition, the ruling Liberals would knock the wind out of the sails of all opposition parties by neutralizing a key component of their respective tax platforms.

From a messaging point of view, Mr. Martin can also sell the cumulative effects of this measure as a multi-year plan of tax reform and relief.

Finally, this year marks 14 years of "bracket creep." Seven years were courtesy of the Tories, but the last seven years are courtesy of the Liberals. From here on in, the devastating effects of bracket creep rest squarely on Paul Martin's shoulders. Enough said - so Paul, the ball is now in your court.