Friday 20 March 2009

Did somebody say "Hidden Tax"?

A staff writer at the Freep wrote a pretty good editorial about tax increases by stealth (also at Jimmy's place) with regards to increases in surcharges, and in particular land transfer taxes. While I agree completely, there is a different tax increase by stealth that I'm more concerned about -- one that gets you every year:

The provincial government did not increase the provincial tax bracket thresholds at all from 2002 to 2007. Finally in 2008 they threw us a piece of crust with a small increase in the top threshold...

These are tax increases by stealth. Every year inflation errodes your purchasing power. You need higher income to maintain the same standard of living, but if the tax thresholds don't increase more of your income will fall into higher tax brackets so your 2 and 3 percent raises at work are clawed back by the province, and your taxes -- in real terms -- are increasing.

Other provinces don't seem to have this problem. Saskatewan, for example, has increased it's thresholds every year over the same span, from 30,000/60,000 to 39,135/111,814:

You can check out historical rates at the CRA website.

Is it any wonder why Saskatchewan is leaving us behind?


Colin Fast said...

As the land transfer tax is charged on an incremental scale (0.5% for the first $100k, 1% for $100k to $200k, 2% above that), homebuyers have suffered from bracket creep as well as home prices have gone up considerably in recent years.

cherenkov said...

Good point, Colin. At least you only have to pay it one or twice a lifetime. :-) I know I was a little bit shocked when I had to pony up.

To bad that you didn't quite pull off the election for school trustee. It sounded like you had some good ideas there. I knew somebody who worked with MAST and got the impression that fresh thinking was sometimes in short supply.

Anonymous said...

no offense and not that it's a bad idea to peg tax brackets to inflation but I think oil and gas have a little more to do with Saskatchewan's success than the particular bit of policy you're advocating.

cherenkov said...

What about our "Hydro Advantage"? Between their lower personal taxes and lower corporate taxes, they have a more competitive environment for businesses of any industry to grow. Our government may run advertisements that say "Manitoba means business", but actions speak louder than words and Saskatchewan has been growing faster and moving from "have-not" to "have" status, while most of our growth has been in the public sector and we are becoming increasingly reliant on equalization payments. You can't chalk all of that up to "they have oil and we don't". At some point you have to make a decision to compete.

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