Beware of Governments Bearing Tax Gifts

This commentary, first published as an op ed in The Ottawa Citizen, discusses possible tax changes in the 1999 Budget. The paper notes that any income tax cuts announced in the Budget will be worth less than their actual amount because of partial deindexation. Under partial deindexation, tax brackets and credits do not keep pace with inflation; they are increased only to the level of inflation minus three percentage points. While this practice results in tax increases for all Canadians, low-income households have been hardest hit; partial deindexation has added more than one million individuals to the tax rolls since 1988. Within five years, partial deindexation will swamp any so-called tax cuts. Ottawa should restore full indexation to the income tax system. Other tax priorities include a redesign of the Canada Pension Plan tax credit to provide geared-to-income tax relief, a reduction of Employment Insurance premiums (or restored coverage of the program) and additional tax assistance for disability costs.

ISBN – 1-894159-41-1