Alberta’s provincial government has raised hundreds of millions of additional tax revenues since its decision to end indexation, according to a new report.
The report from the University of Calgary’s School of Public Policy says that indexation of tax brackets is done in response to inflation.
“As incomes rise to keep up with inflation, income tax thresholds must also rise to avoid bracket creep,” the report released Tuesday said.
“That is, if income tax thresholds are not indexed to inflation, an increase in income will result in higher taxes paid by taxpayers, even though their purchasing power has not changed.”
As the report notes, the UCP government announced in its 2019 budget that it would “temporarily suspend indexation of non-refundable tax credits and tax bracket thresholds.”
According to the study, the provincial government’s de-indexing policy in 2020 meant Albertans paid $118.6 million more in taxes than they would have otherwise.
“Of taxpayers who had to pay more in 2020, the average amount paid more was $51.43. By 2022, this had grown to $345.7 million, for an average increase in taxes paid of $147.87” , says it.
“In total, the Alberta government generated $646.9 million in additional tax revenues between 2020 and 2022 as a result of deindexing.”
The report was written by economists Lindsay Tedds and Gillian Petit.
It’s also unclear whether any return to indexing will be cumulative so Albertans can catch up on the purchasing power of their income.– U of C School of Public Policy study
They say in the study that last month, when Treasury Secretary Jason Nixon put out the final results for fiscal year 2021-22, no path to deindexation was identified, despite posting a $3.9 surplus. billion.
“It’s also unclear whether any return to indexing will be cumulative so Albertans can catch up on the purchasing power of their income,” they wrote.
In an email statement to CBC News, Nixon said the province has done more to tackle inflation than any other jurisdiction in the country, “with more than $2 billion in emergency measures going to Albertans in the past three months. “
The province has suspended the provincial gas tax and will provide electricity and natural gas discounts. Nixon said Albertans also pay the lowest personal income taxes in the country.
“The Alberta government has always maintained that when Alberta’s economic and fiscal situation has stabilized, the government will review Alberta’s general tax system to ensure it is efficient and competitive, stimulates economic growth and employment, and generates adequate revenues.” Nixon said.
“Right now, we are focused on building and maintaining a stable fiscal framework for the province now and in the future by prioritizing debt repayment and the growth of the Alberta Heritage Savings Trust Fund.”