No new taxes, but relief is minor

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This article was published 11/04/2017 (2852 days ago), so information in it may no longer be current.

Hurry up and wait: that’s the message for taxpayers hoping for significant relief in the 2017 budget.

The province will continue to index both the basic personal exemption — the amount you can earn without paying taxes — and the various tax brackets to inflation, but the combined savings for 2017 will work out to $71 for people earning the most.

Those savings will increase to $157 in 2018, $254 in 2019 and $353 in 2020.

The estimated cost to the treasury for the 2017-18 fiscal year is $23.3 million.

For those earning the least, the basic personal exemption will rise from $9,134 in 2016 to $9,271 in 2017, $9,438 in 2018, $9,627 in 2019 and $9,819 in 2020.

The first tax bracket tops out at $31,000 in 2017, rising to $33,325 in 2020. Those earning between $9,271 and $31,000 will pay taxes at 10.8 per cent. The tax rate for income between $31,000 and $67,000 is 12.75 per cent, and is 17.4 per cent on income more than $67,000.

The province estimates indexing the basic personal exemption means more than 2,100 Manitobans now paying taxes at 10.8 per cent will pay no taxes in 2017.

Meanwhile, anyone hoping for a surprise cut to the provincial sales tax will be disappointed. The Tories are holding to their promise to scale back the PST in the final year of their current mandate, meaning it won’t appear in the budget until the spring of 2020.

Many of the tax credits Manitobans have used remain, but there are changes to credits you can claim for political contributions. The province is increasing the maximum eligible contribution to $2,325, but is leaving in place previous brackets for political contributions, meaning only those contributing the highest amounts will see any changes to their credits.

For example, up to $400, a 75 per cent credit means a maximum credit of $300. From $401 to $750, a 50 per cent credit results in a maximum credit of $475. Those numbers remain unchanged. A rise in the maximum eligible contribution from $1,275 to $2,325 means the maximum credit at that level also rises, from $650 previously to $1,000 effective in 2018.

Finance Minister Cameron Friesen said the move to simplify tax credits is deliberate and will continue.

“Tax credits need to be in the estimates cross-hairs every year,” he said. “An ungainly tax-credit system is evidence of a high-taxation environment.”

Businesses will see some changes, not all of them positive. The biggest hit to corporate taxpayers is the research and development tax credit, which is reduced from 20 per cent to 15 per cent. The change will save the province $9.2 million. Under this credit, businesses engaged in R&D under contract with prescribed Manitoba institutions, including post-secondary schools, could claim 100 per cent of the credit. Those engaged in R&D on their own can claim 50 per cent of the credit.

The non-refundable manufacturing investment tax credit is also being halved, for a savings of $4 million. This is a credit for qualifying property acquired after Tuesday, and is being cut from two per cent to one per cent. The change doesn’t affect the eight per cent refundable manufacturing investment tax credit.

The change means the net cost of every $1,000 of capital purchases rises from $972 to $983.

A variety of little-used tax credits are being eliminated, including the co-operative development tax credit, the odour control tax credit, the nutrient management tax credit, the riparian tax credit, the Neighbourhoods Alive! tax credit and the data processing investment tax credits.

The fiscal impact of eliminating each tax credit is negligible. For example, the province says since 2011, when the Neighbourhoods Alive! tax credit was started, there have been zero claimants.

Parents who claim the children’s fitness tax credit and the children’s arts and cultural activities tax credit will continue to claim those on their Manitoba taxes despite losing these credits on their federal tax returns.

kelly.taylor@freepress.mb.ca