Premier Jason Kenney is trying to assure Albertans that there won’t be tax hikes in the upcoming budget, but he’ll have to forgive taxpayers for being skeptical. Afterall, he promised not to increase taxes before his first budget, then went through the backdoor to increase the government’s income tax take. For Kenney to live up to his promise this time around, he must reverse the income tax hike known as bracket creep.
During a press conference last week, Kenney seemingly took tax hikes off the table.
“This would be the worst possible time to sink government’s hand deeper into the pockets of taxpayers who are already coping with huge financial stress,” said Kenney.
With a statement like that, it’s a safe bet that the government won’t increase any tax rates or overtly introduce any new tax. But taxpayers need to guard against other ways that politicians can put their grubby paws on our paycheques.
Case in point: the United Conservative’s first budget.
Leading up to the 2019 budget, the premier promised not to raise taxes.
“It will be a credible path to bring our finances back to balance without raising taxes,” said Kenney, a month before the budget was tabled.
But the 2019 budget did increase taxes through a sneaky type of income tax hike known as bracket creep.
Bracket creep happens when governments stop indexing tax brackets with inflation, which can push taxpayers into higher tax brackets even though we can’t actually afford to buy more. Bracket creep also allows inflation to erode the tax-free portion of our income.
Albertans will be paying higher income taxes this year unless the government stops bracket creep by once again moving the tax system with inflation.
The finance department estimates that the de-indexation of the income tax system will cost Albertans $196 million this year. By the end of 2022, de-indexation is expected to have cost Albertans more than $600 million.
Most governments know that bracket creep is wrong.
This year, Saskatchewan gave bracket creep the boot to help “keep the tax system fair, competitive and affordable.” That means Alberta is alongside only Nova Scotia and Prince Edward Island as governments that don’t index their income tax brackets at all.
Kenney has repeatedly said that a pandemic and economic downturn is no time for government to be reaching deeper into Albertans’ pockets.
Last March, the Alberta government walked back its property tax hike because “during a pandemic, Alberta households should not need to worry about paying additional property taxes.”
That would make the decision to increase income taxes even more of a head scratcher, as Kenney knows better than most how bracket creep eats away at taxpayers’ wallets.
As a Reform Party member of Parliament, he wrote a scathing column in 1997 bashing the federal Liberals on bracket creep.
“For low and middle income families, bracket creep can suck enough money from the family budget to cause serious financial hardship,” wrote Kenney.
Kenney concluded his column with a clear recommendation for the federal government:
“An interim step towards broad applied tax relief would be to end the hidden and regressive tax grab of bracket creep.”
What’s good for the goose is good for the gander. For Kenney to stop the government from sinking its hands further into our pockets he’ll need to take his own advice and “end the hidden and regressive tax grab of bracket creep.