To date, the NDP fiscal plan leaves little room to expand spending on core services, while proposals from the Liberals will generate new revenue
September 8, 2023
For immediate release (Winnipeg, Treaty One): New statistical analysis of the Progressive Conservative’s proposal to cut the tax rate on the lowest income tax bracket in half over the next four years shows that the party’s press release over-estimates the size of the benefit while drastically underestimating the total cost to the provincial treasury.
On September 5th, the PCs announced they would reduce the tax rate applied to the lowest income tax bracket from 10.8% to 5.4% over the next four years, offering a maximum benefit of approximately $1,900 to an individual earning $50,000. CCPA analysis using Statistics Canada’s tax modeling software SPSD/M 30.0, finds that the average benefit would in fact be roughly $1,500, $400 lower than the amount noted in the party’s press release (see Table 1 “Average avoided in taxes per filer”).
The proposed plan ensures that the lowest income Manitobans receive the least. The top half of tax filers, with taxable income of over $47,000 a year in 2027 would see a benefit of roughly $1,500. In contrast, the poorest fifth of Manitobans would receive essentially no benefit. This is because low-income households already receive enough tax credits to eliminate taxes owing. Providing additional credits or tax cuts doesn’t further help them, as shown in previous tax analysis by CCPA-MB. The third and fourth deciles, those with incomes between $20,000 and $38,000 would see an average tax reduction of approximately $440 a person.
“Tax cuts provide little to no help for low-income Manitobans struggling with the cost of living. These tax cuts give away big savings to high-income individuals while doing relatively little for moderate and low-income families. Cutting the tax rate on the lowest income tax bracket in half seriously jeopardizes long-term revenues needed to pay for core provincial services like healthcare, education, and infrastructure.” says Niall Harney, Errol Black Chair in Labour Issues and the Canadian Centre for Policy Alternatives – Manitoba.
Halving the tax rate on the lowest income tax bracket would cost the provincial government $981 million in 2027, when the full reduction kicks in, far higher than the $150 million price tag cited by the Progressive Conservatives. $981 million is larger than the entire budget for post-secondary education and training ($895 million in 2023/24).
Table 1: Taxes avoided by taxable income if tax rate on first bracket lowered to 5.4% (2027)
To date, the New Democratic Party has committed to maintain the taxation framework outlined by the government in budget 2023/24, including a 50% reduction to education property taxes, increasing the Basic Personal Exemption to $15,000 and keeping tax bracket changes. As outlined in previous CCPA-MB research, these tax changes deliver disproportionate benefits to high-income earners and will increase income inequality in Manitoba. The NDP has also committed to temporarily eliminate the provincial gas tax at a cost of $165 million. On top of commitments to balance the budget in four years, these tax commitments would leave an NDP government with little fiscal room to increase spending on core services without cuts to other budget items.
The Liberal fiscal proposal outlines the largest increases in provincial revenue for renewed spending on public services among the three major parties. The Liberals propose eliminating education property tax rebates for all but 20% of the least well-off Manitoban households while eliminating the Basic Personal Exemption for individuals earning more than $120,000 annually. Revenue projections for these proposals have not yet been released.
Niall Harney, Senior Researcher, Errol Black Chair in Labour Issues
Analysis of the Progressive Conservative tax proposal was conducted using Statistics Canada tax modeling software SPSD/M 30.0, which simulates the entire Canadian (and Manitoban) tax systems with representative tax filer data.
Table 2 lays out the values of key variables of the Progressive Conservative plan by tax year. SPSD/M can provide tax estimates out to 2027, the year the plan would be fully phased in. The Progressive Conservative press release specified a maximum benefit of $1,900 by 2028, a year after the plan would be fully phased in. SPSD/M cannot simulate the values for 2028, but they’d be similar to those from 2027 with an inflationary adjustment.
Note: Year to year growth rates are those specified by SPSD/M 30.0 for these variables
Analysis using SPSD/M finds that halving the tax rate on the lowest income tax bracket between 2024 and 2027 would create a tax reduction of roughly $1,500 a filer as shown in table 1. The $1,900 maximum benefit figure published by the Progressive Conservatives, while technically possible, is highly unrealistic. It would only occur if a tax filer was only claiming the Basic Personal Amount and no other Manitoban non-refundable credits. In almost all cases, tax filers are claiming at least one additional non-refundable credit as listed below. For workers, they’d be claiming the EI and CPP contributions credits. For seniors, they’d be claiming the Age amount and Pension credits. For students, they’d be claiming the Tuition and Education credits.
Once additional credits are claimed, the benefit of cutting the bottom bracket tax rate decreases from the theoretical maximum of $1,900. Amounts in additional non-refundable credits were already untaxed and so reducing the tax rate for them is irrelevant. The more one is claiming in these non-refundable credits, the less one has counting in the first tax bracket to gain from a lower tax rate.
Taking these real world factors into account, the benefit for filers will be $400 less a year than the theoretical maximum. This would mean savings of roughly $1,500 a year instead of the claimed $1,900.
Manitoba non-refundable tax credits:
Basic Personal Amount
Spouse Eligible Dependent tax credit
Caregiver Tax Credit
Fitness Tax Credit
Children’s Arts tax credit
CPP contribution tax credit
EI contribution tax credit
Tuition tax credit
Age amount tax credit
Pension Income tax credit
Medical expense tax credit
Disability tax credit
Provincial education tax credit
Volunteer firefighters amount
Interest on student loans
Education tax credit
Manitoba Family Tax Benefit