Our provincial treasurer has got a tight grip on tax dollars and he’s not letting go. Finance Minister Wes Sheridan is not giving in to pressure to raise the basic personal income tax exemption – the amount individuals are allowed to earn before they start paying taxes.
Opposition MLA James Aylward raised the issue in the legislature back in December, asking Sheridan to raise the exemption. Sheridan said no.
On Monday, the issue was raised again when the Canadian Federation of Independent Business released a report revealing how P.E.I. and two other provinces are actually hiking taxes without telling their residents.
P.E.I.’s basic personal exemption hasn’t increased since 2008. So, Islanders are paying incrementally higher taxes every year because the exemption doesn’t increase with inflation as it does in most other provinces.
This “bracket creep” was long-ago addressed by the federal government and seven out of 10 provinces took steps to correct it by automatically increasing their tax brackets and the basic personal exemption based on inflation rates. The three provinces that didn’t were P.E.I., Nova Scotia and Manitoba.
So we’ll be paying more in taxes in 2014 than we were in 2013.
The Canadian Taxpayers Federation, who joined with the CFIB in chastising the P.E.I. government for not raising the exemption, presented the example of a single-income family with two children earning a $60,000 annual income. They will pay $136 more in taxes in 2014.
“This is really quite sneaky,” said Erin McGrath-Gaudet from the CFIB. “Indexing ensures that a person’s buying power from year to year isn’t eroded by paying more personal income tax – that’s why most governments do it automatically every year. On P.E.I., however, even if your income is just keeping up with inflation, you pay more taxes.”
What’s worse is that the bracket creep affects low-income earners the most.
“If you are earning minimum wage on P.E.I., your effective personal income tax rate has almost doubled over the last 10 years,” said McGrath-Gaudet. “That is shameful,” she says.
Sheridan’s excuse for not increasing the basic exemption is that he doesn’t believe it’s the best way to help low-income Islanders, and those with higher incomes will also benefit. So be it.
If this isn’t the best way, what is, and why hasn’t he implemented it?
If high–income earners have more money in their pockets, they will likely be spending more, thus injecting more money into the Island economy.
Sheridan is refusing to look at the issue again until the province’s budget is balanced – in 2015. What happens if the budget isn’t balanced then? How long are we going to have to wait to get that basic exemption bumped up?