The United Conservatives promised to balance the budget without raising taxes, but buried in the recent budget is a sneaky, backdoor income tax hike known as bracket creep.
Bracket creep happens when governments don’t move tax brackets with inflation, and taxpayers get bumped into a higher tax bracket even though what we can afford hasn’t changed.
Government bureaucrats estimate this will cost taxpayers hundreds of millions of dollars.
For some reason, Finance Minister Travis Toews thought it would be a good idea to try to convince Albertans that he’s not raising taxes.
Next time, Toews should run it by a well-known tax hawk, and his own boss, Premier Jason Kenney. Kenney knows better than anyone how bracket creep eats away at taxpayers’ wallets.
“(Bracket creep is a) hidden and regressive tax grab,” wrote Kenney in a column published in December 1997.
Kenney clearly articulated why bracket creep is a tax hike.
“First, inflation generally causes taxable income to increase at a faster pace than real income. For example, Canadians earning less than about $6,500 are exempt from paying federal taxes because of the existence of the basic personal credit, a tax-free threshold that must be crossed before any federal taxes are owed.”
Kenney even provides examples.
“Consider the example of a taxpayer named Joe who earns $6,500 this year from his part-time job. In 1996, Joe would pay no taxes since he has not crossed the tax-free threshold yet.
“But because Joe’s salary increases with inflation, the result would be that Joe moves into a taxpaying bracket. In effect, Joe’s nominal income increases, but his real income stays the same. The result is that Joe’s purchasing power is reduced, and he must hand over $50 to the taxman.”
Over time, inflation erodes the tax-free portion of everyone’s wages, which can really bite low-income earners.
“The second effect of bracket creep is the way it pushes middle-income earners into higher and higher tax brackets, as their real incomes remain the same,” Kenney wrote.
Kenney knows that Albertans will be feeling the pain if he allows bracket creep to siphon money out of our wallets.
“There is a social cost to de-indexation which cannot be ignored.”
Does Kenney think bracket creep is a tax hike? Clearly, yes.
The Ministry of Treasury Board and Finance is plotting a perilous path by advising the finance minister to ignore something the premier says cannot be ignored. And didn’t Kenney promise a plan to balance the budget without tax hikes?
“It will be a credible path to bring our finances back to balance without raising taxes,” said Kenney before his first budget.
When the government increases its income tax revenues by hundreds of millions of dollars, it’s a tax hike.
Kenney used to stick up for taxpayers against politicians who wanted to increase their tax take so covertly. In fact, in 1999, Kenney stood up in question period and fired a blistering query at former federal finance minister Paul Martin.
“How can the minister continue to stand in his place and justify a tax system which taxes people without their even knowing it through this pernicious tax grab called bracket creep?” demanded Kenney.
How is the Alberta finance minister going to answer that question in the legislature when he’s standing beside the man who originally posed it?
Albertans didn’t vote for the United Conservatives to put in a sneaky backdoor tax grab. Voters gave elected officials a clear mandate to clean up the fiscal mess without raising taxes.
Kenney should take his own advice and immediately cancel this hidden tax grab.
Franco Terrazzano is the Alberta director for the Canadian Taxpayers Federation.