Alberta government took in hundreds of millions in additional tax dollars, new report says

Alberta’s provincial government has been bringing in hundreds of millions of additional tax revenues since deciding to hit pause on indexation, according to a new report.

The University of Calgary’s School of Public Policy report says indexation of tax brackets is done as a response to inflation.

“As incomes rise to keep pace with inflation, income tax thresholds must also rise to avoid ‘bracket creep,'” said the report released on Tuesday.

“That is, if the income tax thresholds are not indexed to inflation, an increase in income will result in higher taxes paid by the taxpayer even though their purchasing power has not changed.”

As the report notes, the UCP government announced in its 2019 budget that it would “temporarily pause indexation of non-refundable tax credits and tax bracket thresholds.”

In 2020, according to the study, the provincial government’s policy of de-indexation meant that Albertans paid $118.6 million more in taxes than they would have otherwise.

“Of those taxpayers who had to pay more in 2020, the average amount more paid was $51.43. By 2022, this had grown to $345.7 million, for an average increase in taxes paid of $147.87,” it says.

“In total, between 2020 and 2022, the Alberta government accrued $646.9 million in additional tax revenues as a result of de-indexation.”

The report was written by economists Lindsay Tedds and Gillian Petit.

It is also unclear whether any return to indexing will be cumulative so that Albertans catch up in terms of the purchasing power of their income.– U of C School of Public Policy study

They say in the study that last month when Finance Minister Jason Nixon tabled the final results for the 2021-22 fiscal year, it didn’t mention a path to de-indexation despite posting a surplus of $3.9-billion

“It is also unclear whether any return to indexing will be cumulative so that Albertans catch up in terms of the purchasing power of their income,” they wrote.

In an email statement to CBC News, Nixon said the province has done more to address inflation than any other jurisdiction in the country, “with over $2 billion in relief measures going to Albertans in the last three months.”

The province has suspended the provincial gas tax and is to provide electricity and natural gas rebates. Nixon said that Albertans also pay the lowest personal income taxes in the country.

“Alberta’s government has always maintained that when Alberta’s economic and fiscal situation has stabilized, the government will review Alberta’s overall tax system to make sure it is efficient, competitive, encourages economic growth and employment, and provides sufficient revenue,” Nixon said.

“At the moment, we are focused on building and maintaining a stable fiscal framework for the province now and into the future by prioritizing debt repayment and growing the Alberta Heritage Savings Trust Fund.”

View original article here Source