Reversing the tide on income inequality in Manitoba 

By Niall Harney

Previously published in the Winter 2024 issue of the Monitor page 6.

Federal and provincial governments’ rapid responses to the economic fallout caused by COVID- 19 taught us important lessons about the capacity of government to reduce poverty and inequality in the 21st century. 

Principally, the launch of the Canada Emergency Response Benefit (CERB) in the early months of the pandemic showed us it is possible for the government to seriously reduce absolute poverty and income inequality in short order. While it was the federal government that footed the bill for CERB, there are lessons from this experience that can, and should, be taken up by provincial governments such as Manitoba. 

Premier Wab Kinew’s government, elected on October 3, 2023, faces a challenge to roll back the previous government’s austerity policies while addressing affordability and increasing rates of poverty in Manitoba. 

Indeed, the pandemic layered hardship on health and education systems that were already vulnerable due to provincial government austerity. 

According to Campaign 2000’s 2023 provincial report card, Manitoba still has the highest level of child poverty in Canada, which unfortunately has been the case for many years. Additionally, income and wealth inequality—and the challenges associated with it—are becoming increasingly visible in Manitoba. 

Coming out of the pandemic, many Manitobans are struggling to cope with high inflation and high interest rates, which are disproportionately impacting working-class households. 

Using the affordability crisis for political cover, Manitoba’s previous government (led by former Premier Heather Stephanson) released a budget in March 2023 that included $486.1 million in tax cuts—the largest single year cut since the Progressive Conservatives took office in 2016. 

While official government communications promoted tax savings for low-income households, analysis from CCPA Senior Economist David Macdonald revealed that the top 10 per cent of tax filers would receive more in tax reductions than the bottom 50 per cent of filers combined. On average, the top 10 per cent of tax filers will get a $1,322 reduction in their tax payments while the bottom 20 per cent will get just $37 dollars in savings. 

Adding up the cost of tax cuts since 2016 reveals that the Manitoba government has eliminated $1.6 billion in annual receipts to the provincial treasury, bringing ownsource revenues (revenue from taxes and levies) to their lowest level in decades. 

There is no great mystery as to why provincial services are in such a threadbare state. 

Such a significant tax giveaway at a time of crisis for public services, like health care and education, alongside the revelations of rapidly increasing income inequality, bring into sharp relief the distribution of burdens and benefits in our society since the onset of COVID-19. 

Since 2021, working-class households recovering from the initial economic shock of the pandemic have struggled to keep up with the rising cost of living while high-income households have generally come out of the pandemic with a significant raise. 

Corporate Canada and its CEOs have profited handsomely from price increases, with profits reaching all-time highs in 2022-23. 

The need for government income redistribution to support working- class households while raising revenue to invest into public services is clear. 

Reversing the tide of income inequality in Manitoba will be no small feat, but there are ways to alter the pathway set by Manitoba’s previous government. 

A CCPA Manitoba report, Funding Our Way: Rebalancing revenues and spending for a fair and prosperous Manitoba, reveals that moderate changes to Manitoba’s 2023 budget could substantially reduce income inequality and poverty while raising money for public services. 

These proposals are based around principles of tax fairness and they could directly respond to the urgent needs of low- and middle-income households. 

At the core of the model advanced in Funding Our Way is a proposal to reform the Basic Personal Amount to make it more progressive. The Basic Personal Amount is a non-refundable tax credit that provides a rebate on income tax paid on the first $15,000 of individual income. 

Raising the Basic Personal Amount from $10,145 to $15,000 was the centerpiece of tax cuts advanced in Manitoba’s 2023 budget, with the government arguing this would provide hundreds of dollars to low-income households. 

The problem with the Basic Personal Amount is that it is non-refundable, so low-income households who already qualify for more tax credits than they can use don’t benefit from raising the Basic Personal Amount. 

This tax break is actually a well-disguised tax cut for the well-off, mostly benefiting higher-income earners while providing the lowest-income earners no relief at all. 

Transforming the Basic Personal Amount into a refundable credit, paid monthly to all Manitobans, could significantly boost the income of low- and middle-income households, acting in some ways like a basic income. 

By making the credit refundable and raising the maximum amounts, this credit could provide $16,800 to a single adult, $17,000 to a single parent, $19,800 to a couple, and $22,200 to a two-parent, two-child household. 

These benefits would be income tested and anyone earning less than the median income would see their income increase, while furthering tax fairness. 

The following measures to income and sales tax frameworks are proposed to increase tax fairness and affordability for those who need it most: 

• Turning the basic personal amount into an income-tested refundable tax credit.

• Returning tax brackets to 2016 levels and introducing a new high-income tax bracket on income earned over $100,000.

• Increasing the PST back to its previous level.

• Eliminating a number of small tax credits.

• Increasing the corporate income tax rate by one per cent.

• Reversing business tax cuts to the health and education levy.

• Eliminating the child care development tax credit.

• Eliminating a number of small tax credits.

• Introducing a mansions tax and making the land transfer tax more progressive. 

In total, these changes are estimated to net Manitoba an extra $122.8 million in revenue. 

These kinds of tax changes have many benefits. Above and beyond providing a basic income, they would help Manitoba promote well-being by providing additional revenue to fund public services and they would help fund a just transition. 

Manitoba can afford to raise revenue. Its share of revenue as a percentage of the GDP and ownsource revenue as a percentage of the GDP have trended downwards since 2007-08. 

Manitoba is in the middle of the pack relative to other provinces when measuring provincial government revenue as a percentage of the GDP, provincial taxes and fees as a percentage of the GDP, and provincial government income from households as a percentage of the GDP. 

Where it ranks near the bottom is corporate income tax revenue as a percentage of the GDP, which has been falling steadily since the early 2000s. 

Raising taxes on those most able to pay is not only necessary to sustain our public services and reduce inequality, but may also be popular. 

Over 72 per cent of Manitobans support a tax on homes worth $1 million. Nationally, 89 per cent of Canadians support a wealth tax, including 83 per cent of Conservative voters. 

Reversing income inequality while making investments in public services is clearly within our grasp, but the question remains whether Manitoba’s new government will act. 

Niall Harney is the CCPA Manitoba’s senior researcher and Errol Black Chair in Labour issues.