Imagine what your family could do with an extra $400.
Thanks to Prince Edward Island Premier Dennis King, Islanders won’t be imagining what they could do with that extra money in their pockets. They’ll be living it.
King’s sweeping tax relief will mean taxpayers on the Island will be cheering the loudest when the crystal ball drops in Times Square to ring in the New Year.
A household with two taxpayers earning $60,000 next year stands to save $400 on provincial taxes. Think of how significant $400 in savings will be. That could cover the cost of two weeks’ worth of groceries for a family of four.
At a time when more than 50 per cent of Canadians say they’re $200 away from not being able to pay their bills, an extra $400 in the family budget could make all the difference.
The King government’s 2024 tax relief is the biggest change P.E.I. has made to its income tax regime since 2008. It’s also one of the largest income tax cuts implemented by an Atlantic Canadian province in more than a decade.
There’s also another reason why this tax relief is so important: bracket creep.
P.E.I. is one of just two provinces that doesn’t adjust income tax rates to keep pace with inflation. That means every time Islanders received a raise at work to match inflation, the scrooge at Province House forced them into a higher tax bracket even though they weren’t really earning more.
Consider an example. A P.E.I. taxpayer who earned $50,000 in 2008 would have seen 8.3 per cent of their paycheque sent to the provincial coffers in Charlottetown. If that taxpayer only received cost-of-living pay raises between then and now, they would be earning roughly $69,000. But because of bracket creep, 9.9 per cent of that income would now be taken by the provincial taxman.
In just 15 years, that taxpayer’s provincial tax burden would have increased by 19 per cent, despite being no better off financially. That’s a massive tax hike by stealth. And it’s high time politicians at Province House put a stop to it.
Next year’s income tax cut will deliver much-needed relief to Islanders on their income tax bills. But that relief is a one-time deal.
The King government hasn’t committed to getting rid of bracket creep after 2024. That means, if the province doesn’t index income tax rates, the tax cut Islanders will enjoy next year will be eaten away by bracket creep over the next few years.
Killing bracket creep would have a big impact at the kitchen table, but far less so on the province’s balance sheet. Ending bracket creep would leave about $35 million in taxpayers’ wallets each year. The provincial government could easily offset that by trimming spending by one per cent.
Only Nova Scotia and P.E.I. haven’t gotten rid of bracket creep. It’s time for P.E.I. to join eight other provinces, and the federal government, and stop taxing people more simply for keeping up with the rate of inflation.
King’s 2024 income tax cuts are a big deal. The tax cuts will save most families hundreds of dollars next year and will help them make ends meet at a time when budgets are squeezed.
But for King’s tax cuts to have a lasting effect, bracket creep must go. When the government presents its 2024-25 budget early next year, King should end bracket creep once and for all.
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