The province may insist it can't afford to index its tax brackets to reflect inflation, but until it does, Island taxpayers are forking over more of their hard-earned money to the provincial coffers than they should. And that's not fair.
Every year at this time, the Canadian Taxpayers' Federation issues its annual New Year's Tax Changes Report, and this year's report exposed a familiar discrepancy: Prince Edward Island is one of three provinces that doesn't index its tax brackets, and as a result, the governments in those three provinces collect proportionately higher taxes from workers in the province receiving inflation adjustments to their pay packets. It's what is known as 'bracket creep'.
It also has been called a blatant tax grab, and for good reason. Many workers don't realize they're paying more proportionately than people in provinces where the tax brackets are indexed. The federal government began indexing its tax rates for inflation in 2000, and most provinces, with the exception of Manitoba, Nova Scotia and Prince Edward Island, have since followed suit.
In its report this year, the federation outlined the extra taxes all Canadians will have to pay this year because of EI and CPP payroll tax hikes. The impact of these increases no doubt will be subject to much debate. No one likes to pay higher taxes, but the federal government could argue convincingly why it's proceeding with the increases. Both programs require funding, and since there is really only one taxpayer, it's reasonable that all Canadians face the fact that they'll be expected to shoulder their share of the burden.
What's not reasonable is for taxpayers in certain provinces to pay more simply because their provincial government doesn't recognize inflation in their tax brackets and sees fit to glean more from workers whose inflation-adjusted salaries move them unprotected into higher tax brackets. According to the information provided by the Canadian Taxpayers' Federation, an average Island family with two children and two working adults earning a combined $80,000 will pay $92 more in provincial income taxes resulting from bracket creep, $79 more in Canada Pension Plan premiums and $70 more in employment insurance contributions.
Finance Minister Wes Sheridan's response to the position of the taxpayers' federation this year is similar to last year's. In his view, the province can't afford to make changes to the current system, and Islanders shouldn't expect any changes until the provincial budget is balanced. He reminded Islanders that the bond raters are watching. "The bond raters have certainly put that very clearly to all the provinces....there's no question that they're watching each and every one of us with regard to our fiscal plan and ensuring that we're moving toward that balance."
That explanation isn't adequate. Governments establish rules for everyone else, presumably to ensure that fairness prevails. It has a responsibility to practise what it preaches. It shouldn't be taking a disproportionate share of taxes from Islanders just because it can.