Manitoba, Nova Scotia and Prince Edward Island are the only provinces that do not index tax brackets for inflation. This means as incomes rise every year to offset the effects of inflation Manitobans are quietly moved into higher tax brackets. New research from CFIB shows this hidden tax hike will cost a single Manitoban between $48 and $475 in 2013 (See Table 1).
Adjusting tax brackets each year to compensate for inflation removes this problem and ensures a fair tax system. Over the last ten years Manitobans have paid thousands of dollars more in their individual personal income taxes than they should have.
|Manitoba provincial personal income tax overpayment 2003-2013|
Income in 2002
Tax Overpayment in 2013
Total Tax Overpayment 2003-2012
Source: CFIB calculations based on an individual taxpayer income (in 2002 dollars) claiming the basic personal amount, EI premiums and CPP contributions at the 2013 tax rates. Salary and indexed amounts were calculated using the annual Consumer Price Index for MANITOBA from Statistics Canada.
Although the provincial government raised the Basic Personal Exemption by $250 for the 2013 tax year, this $27 tax saving does not offset the additional tax paid due to bracket creep.
This policy is just one of many ways in which Manitoba has an uncompetitive personal income tax system. In fact Manitoba has the highest income tax rates in Western Canada and the lowest basic personal exemption.
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