2009 Canadian Income Tax Changes

Submitted by SadInAmerica on Mon, 01/12/2009 - 1:17am.

So how will income tax changes affect you this year?  Here’s a low down of changes that took effect January 1, 2009.  At the provincial level, the big change in Manitoba was a drop in the lowest personal income tax rate from 10.9 percent to 10.8 percent.  If you earn over $31,000 a year, you’ll save a little over $20.

However, the “savings” will basically be wiped out as our provincial government still hasn’t adjusted our tax system for inflation.

If your eyes glaze over during discussions of income taxes and inflation, here is the translation: Manitoba is one of three provinces that has yet to bring in a generally accepted fairness element to our tax system.  The result, otherwise known as “bracket creep” allows the government to be seen giving with one hand while secretly taking with the other.

At the federal level, there were no changes to tax rates, but the basic personal exemption, the amount taxpayers can earn before paying federal income taxes, increased from $9,600 to $10,100.  The increase to the exemption is about $260 above the annual indexation for inflation.  That means that Canadians earning $10,100 or more a year will save about $39 this year.

The twist at the federal level comes from an increase in CPP and EI premiums on your pay cheque.  If you earn over $42,800, you’ll pay $90 more this year, and your employer will pay $98 more.  Although last year’s cut to the GST will help Manitobans cope with EI and CPP increases, one really has to question the need to increase EI premiums.  After all, the EI surplus is in the billions and continues to grow each year.  Conservative MPs deserves an earful for that one.

When you take inflation into account and look at the whole picture, some taxpayers in Manitoba would have been better off getting a kick in the butt than subjecting their income to the new rates.

Not every Canadian saw tax relief bread crumbs though.  Albertans were this year’s big winner as a result of the elimination of health care premiums.  To an Alberta taxpayer earning over $21,000, the elimination of the premiums will save them about $528 per year or about $1,056 per family.

In Saskatchewan , taxpayers got a nice surprise in October when their government announced a $4,000 increase to their provincial basic personal exemption.  That change alone will save their taxpayers over $400 annually.  At $13,269, Saskatchewan ’s exemption has totally eclipsed Manitoba ’s provincial exemption of $8,134.

Given the current global economic situation, some will argue that now is not the time for tax relief.  That argument ignores the fact that successful economies are driven by the private sector, not the public sector.  Leaving more dollars in the pockets of Canadians will provide them with more resources to purchase goods from local businesses, invest in existing businesses or perhaps even start a new one.

Tax relief may result in some Canadians choosing to bank the savings.  By increasing their respective nest eggs, even more people would be insulated from the need for government assistance.

It’s a win-win either way.

Regardless, the Manitoba government has a long way to go before catching up to the tax-relief offered this year in the two provinces to our West.  At the very least, Premier Doer would be well advised to end the practice of bracket creep and pull Manitoba in-line with the rest of the country.

Colin Craig
Manitoba Director

Canadian Taxpayers Federation can be reached at: admin@taxpayer.com

Colin Craig - January 10, 2009 - source CanadaFreePress

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Submitted by SadInAmerica on Mon, 01/12/2009 - 1:17am.