Tax bite hard­est on min­i­mum wage earn­ers

Busi­ness fed­er­a­tion urges P.E.I. gov­ern­ment to in­crease “tax-free” por­tion of wages

The Guardian (Charlottetown) - - THE PROVINCE -

The Cana­dian Fed­er­a­tion of In­de­pen­dent Busi­ness is again urg­ing the prov­ince to fix “out­dated’’ per­sonal in­come tax rules that don’t ac­count for in­fla­tion.

The pol­icy is par­tic­u­larly un­fair to min­i­mum wage earn­ers in P.E.I., says the busi­ness ad­vo­cacy group.

“It’s a real frus­tra­tion for busi­ness own­ers,’’ said Erin McGrath-Gaudet, the group’s di­rec­tor for P.E.I.

“Over the past num­ber of years we’ve seen some sig­nif­i­cant jumps in min­i­mum wage. It can be a big cost for some busi­nesses but gov­ern­ment is the big­gest win­ner be­cause of the in­creased tax bite on those same work­ers.’’

Over the past 15 years, notes the fed­er­a­tion, the provin­cial in­come tax paid by a full-time min­i­mum wage earner on P.E.I. has al­most dou­bled from 3.3 per cent in 2001 to 5.9 per cent when min­i­mum wage moves to $11 an hour in 2016.

While the to­tal tax bill may not seem as dra­matic as those at higher in­comes, notes the fed­er­a­tion, the im­pact is most dis­pro­por­tion­ate for min­i­mum wage earn­ers.

The fed­eral gov­ern­ment and seven out of 10 prov­inces ad­dress the is­sue by ty­ing the in­crease in their tax brack­ets and the ba­sic per­sonal ex­emp­tion — the amount in­di­vid­u­als are al­lowed to earn be­fore they start pay­ing taxes — to in­fla­tion.

Be­cause P.E.I., in ad­di­tion to Nova Sco­tia and Man­i­toba, doesn’t make the an­nual ad­just­ment, the pur­chas­ing power of the “tax-free’’ amount is eroded and more in­come gets taxed at higher lev­els, even if wages aren’t keep­ing pace with in­creases in the cost of liv­ing. The re­sult of years of this pol­icy, says the CFIB, is that Is­lan­ders at ev­ery wage cat­e­gory start pay­ing tax be­fore any other Cana­dian.

The tax-free amount for Is­lan­ders is $7,708, com­pared to the na­tional av­er­age of $10,880.

A spokesman for the Depart­ment of Fi­nance notes that in 2015 the prov­ince in­creased tax cred­its for Is­lan­ders who need it the most, in­clud­ing se­niors, work­ing sin­gle par­ents, and those with lower in­comes.

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