Thanks to Colin Craig at the Taxpayers Federation for tweeting this link to an Ernst & Young provincial tax calculator.
After playing around with numbers, I couldn't help but write a post about the importance of the tax system and tax rates in helping low income earners and the working poor.
The results really hit me when entering a yearly income of $25000, $20,000 and $15,000.
At $25,000 a Manitoba worker pays $3,965 a year the highest rate in the country. Compare this to $2973 in Ontario, a staggering difference of $992.
At $20,000 a Manitoba worker pays $2675 again the highest rate in the country. This is $1117 than the country's lowest rate in British Columbia.
At $15,000 a Manitoba worker pays $1385 a year, once again the highest rate in the country! Alberta and Newfoundland and Labrador are the lowest at 671$.
In a interesting foot note E&Y point out that these calculation do not include personal tax credits individuals may qualify for. A lot of people might point to the generous tax credits offered here in Manitoba but the reality is that having a little bit more at the end of every paycheck goes a lot farther in having a healthy, balanced lifestyle than getting a bigger refund cheque every spring.
The government likes to make itself look good by offering a lot of these refunds but ultimately it is just taking with one hand and giving back with the other. Allowing people to keep their extra income empowers them to make the right decisions more than any tax credit scheme does.
Also it is impossible to discuss the raising of the minimum wage as an effective policy tool without at the same time discussing the tax rate on lower income earners! Raising the minimum wage without addressing this issue of high taxes on the lowest income earners in society is only a band aid solution to a larger problem.
I'm interested in where you're going in the last paragraph. An argument could be made for lowering the minimum wage (or at least freezing it for some time) and focusing on raising the basic personal exemption instead. Could have the same net impact on earners, while saving some costs for employers.
ReplyDeleteBUT it would mean less white wine for the socialists.
ReplyDelete@PolicyFrog
ReplyDeleteMy comment was mostly that only looking at one without understanding the impact of the other is incomplete.
In the short term the scenario you advocate is probably accurate but in the long term if the minimum wage doesn't rise it has the same impact as only rising the minimum wage without addressing the tax rates.
An incomplete analogy would be to that of trying to pop a balloon. If you squeeze one of the two ends, the pressure simply goes to the other side. If you want to pop the balloon (i.e. poverty) you need to squeeze both end.
I know it's a bit weak as an analogy...
I'm poor!
ReplyDelete