REGINA: The Canadian Taxpayers Federation (CTF) today released numbers to show the extra tax paid by taxpayers in 1998 due to "bracket creep". Bracket creep refers to the fact that tax brackets, exemptions, and credits are not fully adjusted to compensate for the effects of inflation, resulting in a steady increase in the amount of income tax that Canadians pay.

"As people scramble to finish their income tax return by tonight's midnight deadline, they should realize that because of our current tax rules, they are actually paying thousands more in taxes because of bracket creep," says CTF Provincial Director Richard Truscott.

Someone with a $40,000 income will have paid an extra $1,300 to the federal and provincial governments in 1998 - and an extra $8,000 in extra taxes over the past decade. The federal government took in over $10 billion in new tax revenue because of bracket creep in 1998. The provinces have also shared in the windfall of cash to the tune of $2.5 billion.

"Tax went up in 1998 not down. Bracket creep in Saskatchewan has given the politicians hundreds of million in new revenue to spend since 1992 and completely wiped out the tax relief in the 1998 budget," states Truscott.

In 1998, the 2-point reduction in provincial income tax delivered about $45 million in tax relief (assuming the cut was for the entire year). However, bracket creep resulted in $95 million in new tax revenue. Therefore, net provincial income tax went up by about $50 million.

The cost to taxpayers of bracket creep is significant. If the $8,094 in bracket creep taxes lost to the taxman over the last decade (from a $40,000 income) had instead been invested by the taxpayer (assuming a 8% rate of return) it would have grown to $22,794 in 2009, $49,212 twenty years from now, and $106,246 by 2029.