Nova Scotia Premier Tim Houston. From coast to coast, every other government outside of Nova Scotia has acknowledged it is wrong to punish taxpayers simply for receiving a cost-of-living pay raise. Photo credit: CBC/Robert Short
Nova Scotia Premier Tim Houston stands alone by deliberately profiting off of inflation.
By failing to index income tax brackets to inflation, Houston is raising taxes by pushing taxpayers into higher tax brackets even though they can’t actually afford to pay more. That’s what economists call bracket creep.
From coast to coast, every other government has acknowledged it is wrong to punish taxpayers simply for receiving a cost-of-living pay raise. Every government but Houston’s also has a plan to index income tax rates to ensure bracket creep doesn’t occur.
Until several weeks ago, Houston was able to hide behind that fact that Prince Edward Island also punished taxpayers for simply keeping up with living costs.
But in this year’s provincial budget, Prince Edward Island Premier Dennis King announced plans to index his province’s tax brackets next year and review rates every year thereafter.
Now that King has acted, Houston stands alone.
What possible rationale can Houston give for unfairly hammering Nova Scotians with bracket creep?
The government claims it cannot end bracket creep until it “fixes” health care.
News flash: health care will never be fully “fixed.” No government policy or service is ever perfect. Houston is just using health care as a poor excuse to justify profiting off of taxpayers to pad the government’s coffers.
Even the opposition Liberals are calling on Houston to act.
Liberal leader Zach Churchill’s party has introduced legislation to end bracket creep. But because Houston’s Progressive Conservative majority opposes that legislation, it stands no hope of passing without a change of heart from the premier.
According to the Nova Scotia finance ministry, indexing tax brackets would mean leaving $125 million a year more in taxpayers’ wallets.
If the Nova Scotia government ended all of its corporate handouts, the government could afford to end bracket creep and would have $32 million to spare.
The Houston government is choosing to prioritize handouts to businesses over helping taxpayers keep up with inflation.
Bracket creep means that this year Nova Scotia taxpayers will be hit with a tax hike of up to $653 simply because the province refuses to index its income tax rates.
With food prices up $1,000 this year compared to last year, that’s a tax hike Nova Scotians can’t afford.
Houston, of all people, should understand this. Before entering politics, Houston was an accountant. He saw the punishment levied on his clients each year at tax time. Houston should be the one leading the charge against the very policy that his government is protecting.
The last time tax brackets were changed in Nova Scotia was in the year 2000. By failing to index rates, that’s 23 years of tax hikes.
Taxpayers earning $35,000 in Nova Scotia in 2000 were paying 6.4 per cent of their incomes in provincial income tax. But if they received cost-of-living pay raises each year between 2000 and 2022, their provincial income tax bill would have increased to 8.6 per cent of their total income. That’s a 33 per cent provincial income tax hike.
It’s time for the Houston government to stop profiting off of inflation. Nova Scotians are tired of getting hit with tax hikes by stealth. Taxpayers don’t want to be sucker punched with higher taxes every time they get a cost-of-living pay raise.
It is true that Houston’s government didn’t invent bracket creep. Since 2000, the province has had Progressive Conservative, Liberal and New Democratic governments that have all left the system in place.
But bad decisions from previous governments don’t give the current government a free pass for maintaining the status quo.
It’s time for Houston to get in touch with the lives of everyday taxpayers. Nova Scotia needs to put an end to bracket creep now.
Jay Goldberg is the Ontario Director at the Canadian Taxpayers Federation. He previously served as a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.