Just like last year, the 1999 Federal Budget appears to provide some modest, targeted tax relief. As of July 1st, along with $7 billion in new spending and a possible $3 billion pay-down on our $580 billion national debt, taxpayers expect to see $1.5 billion in desperately needed tax relief.

So this budget cuts our taxes- or does it To answer this question, let's look at what the budget actually did to our tax bills. Starting July 1, the basic personal exemption, the amount that each taxpayers is allowed to earn tax-free each year, has been increased by $675 to $7,131.

The budget also eliminates the 3% surtax for the remaining taxpayers who earn more than $50,000, also starting July 1. (Last year's budget eliminated the general 3% surtax for those with incomes of up to $50,000.)

This year's budget also adds $300 million to the National Child Tax Benefit, which is targeted to low and middle-income families, to be fully phased in by 2001.

What does this mean for the average taxpayer A typical two-income family of four earning $50,000 will see $373 in tax relief annually, or about a dollar a day, half of which is the result of changes to the Child Tax Benefit.

A typical single taxpayer, however, will only see tax relief totaling $115 per year.

A closer look reveals that Finance Minister Martin is doing the absolute minimum necessary to allow many taxpayers to keep their heads above water. On the surface the tax cuts appear to put more dollars back in our pockets. If you scratch below the surface, however, things don't look so rosy thanks to two factors: payroll taxes and bracket creep

First of all, the CTF's research reveals that payroll taxes will increase in 1999. For instance, let's take Joe Q Taxpayer making $40,000 a year. In 1999, he will pay $118 more in Canada Pension Plan (CPP) deductions but $58 less in Employment Insurance (UI) taxes, for a net increase of about $60 a year.

The second factor is "bracket creep". Simply put, bracket creep occurs because our tax system is not adjusted to deal with the effects of inflation. Since 1992 prices and salaries have risen, but the tax brackets and credits have not. When the tax brackets are fixed, and incomes grow due to inflation, the tax brackets turn into tax traps. The trap is sprung when a basic "cost of living" increase in your income pushes you into a higher tax bracket. Compared to 1998, bracket creep will amount to approximately another $70 in new tax for our taxpayer making $40,000 a year.

So the bottom-line is this: after subtracting a net payroll tax increase of $60 and the bracket creep of $70, the federal tax savings of $115 is actually a $15 tax increase!

In other words, bracket creep and higher payroll taxes will eliminate the 1999 tax savings for some taxpayers and seriously erode it for others.

Mr. Martin also claims that the tax measures in this budget will also remove 200,000 low-income Canadians from paying tax. But since 1992, bracket creep has been pushing 100,000 taxpayers onto the tax rolls each year.

So now ask yourself: Does the federal budget contain real tax relief or is it all just smoke and mirrors