No Taxation Without Indexation

This report explores the impact of partial deindexation of the personal income tax system, refundable GST credit and federal child benefits. Introduced into the tax/transfer system in 1986 by Mulroney Conservatives, partial deindexation is a “designer virus” instrumental to “social policy by stealth” – the use of arcane and poorly understood technical changes to public policy which were imposed on Canadians without their knowledge, consent or understanding. Partial deindexation has steadily and surreptitiously lowered the federal taxpaying threshold (for single tax-payers, from $10,505 in 1980 to $7,112 in 1998 and an estimated $6,694 in 2003), imposed an annual inflation-induced hidden income tax hike on taxpayers at all income levels, weakened the refundable GST credit (leading to a de facto increase in the GST for poor Canadians only) and eroded the value of child benefits for low- and middle-income families. The report urges Ottawa to reindex the income tax system and federal child benefits (which are being raised, but still are not fully indexed) and to not only reindex but also restore to its original value the refundable GST credit. Following the successful example of cooperative federalism provided by the ongoing National Child Benefit, Caledon calls upon the federal and provincial/territorial governments to develop and implement national principles of tax relief for low- and modest-income Canadians.

ISBN – 1-894159-07-1