The Government of P.E.I. Will it fix the slice drift loophole? • Troy Media
If a company overcharged you $450, you might want an explanation. The least companies can do is stop overcharging you in the future. The prices of everything from groceries to gasoline are rising fairly quickly at no extra cost.
Prince Edward Island MPs owe Islanders an explanation for their income tax bills.
The average family would have $450 more in their pockets if the government hadn’t used a loophole in the tax code known as bracket creep to raise everyone’s taxes for the past 14 years.
This is how it works.
You’ve probably noticed that a $20 bill buys a lot less today than it did in 2008. In fact, it buys about 36% less, according to Statistics Canada.
This decline in purchasing power is commonly referred to as inflation. This essentially means that earning $50,000 in Prince Edward Island this year is equivalent to earning $36,910 in 2008.
The problem is that the province’s tax code has not been adjusted to reflect this loss in purchasing power. The last time the government changed the brackets was in 2008.
As a result, the government has pushed more and more of your income into higher tax brackets year after year.
An Islander earning $50,000 today now pays $453.71 more in income tax because the provincial government has not adjusted the tax brackets for inflation.
Most of the other provinces, as well as the federal government, have solved this problem.
Every year they use Statistics Canada data to tweak their tax brackets a bit and make sure the tax code doesn’t lower your standard of living due to inflation.
Only Alberta, Nova Scotia and Prince Edward Island do not adjust any of their ranges in this way.
And the impact on taxpayers is pretty clear. Just across the bridge in New Brunswick, the government adjusted the threshold at which its taxpayers move into the second tax bracket by $1,052 this year. This saved provincial taxpayers from a $100 tax hike this year.
There is no good reason why Islanders should be condemned to chronic tax increases due to bracket creep.
And it seems that the government is slowly realizing this fact.
Government Whip Cory Deagle asked Finance Minister Darlene Compton if her department would get rid of tranche drift. His exact words were: “Will your department index tax brackets so that they increase year after year with the rate of inflation, as most other Canadian provinces already do?”
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Before Compton could respond, Deagle’s question was applauded by Liberal Whip Robert Henderson and Premier Dennis King.
Compton vaguely replied that it was something the department was looking into. Given that the Prime Minister and the opposition applaud the obvious idea, it would be foolish to dwell on the creep of parentheses. Politicians on all sides know that indexation is long overdue on the Island.
Let’s be clear: bracket creep has cost taxpayers too much for too long. Now that we are dealing with inflation of 8.9% this year, the situation is more serious.
The last thing Islanders need right now is a 15th consequent increase in taxes on top of their growing bills.
The provincial government should have fixed slice drift a long time ago.
But the least it can do is start indexing tax brackets to inflation to stop overburdening taxpayers in the future.
Renaud Brossard is Acting Atlantic Director for the Canadian Taxpayers Federation.
Renaud is a Troy Media Opinion leader. For maintenance requests, Click here.
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