Blog | December 31, 2015

By James Wood, Calgary HeraldHigh-income earners in Alberta will be paying higher taxes in the new year.Increases to income tax rates brought in by the NDP government will come fully into effect in 2016 after being partially implemented in October.Under the new brackets, the first $125,000 of an individual’s income will remain taxed at an unchanged rate of 10 per cent — meaning about 93 per cent of Alberta residents will be unaffected, according to the government.But there will be increased marginal tax rates on dollars earned above that amount, with income between $125,000 and $150,000 taxed at a 12 per cent rate, $150,000 to $200,000 at 13 per cent, $200,000 to $300,000 at 14 per cent, and income over $300,000 at 15 per cent.Paige McPherson, Alberta director of the Canadian Taxpayers Federation, doesn’t like the tax hikes, suggesting they will make the province less attractive for new residents.“It does chip away at the Alberta Advantage,” she said Thursday.“It’s a great sound bite to say ‘tax the rich, oh they can afford it,’ but we have to remember the impact it can have on the economy … income taxes matter when you’re trying to attract the top people.”A single individual making $140,000 will pay an additional $300 under the new tax regime while an individual making $320,000 will have to cough up an extra $7,000, according to the province.However, organizations such as the Alberta Federation of Labour and the Parkland Institute say the tax restructuring is long overdue.The NDP’s income tax changes marked the official end of Alberta’s flat tax, though the former Progressive Conservative government had intended to reintroduce progressive income tax rates before being defeated.Joel French, executive director of Public Interest Alberta, said there would be minimal impact on Alberta’s competitiveness because the tax increases simply bring the province in line with other Canadian jurisdictions.He said Alberta can no longer afford the flat tax.Premier Rachel Notley’s government is grappling with a massive revenue shortfall caused by plummeting oil prices, leading it to project a $6.1 billion deficit for the current budget year.The government expects its income tax changes to bring an additional $800 million to $1 billion into government coffers in the 2016-17 budget year.“The province is starved for revenue and we need to find a way to generate more and this is, at least at this point, the most fair way to do that,” said French.French said the NDP government had gone after “low-hanging fruit” in its tax changes — which also included a corporate tax hike that came into effect in July — and may have to look at other revenue measures in the future if the oil downturn is prolonged.However, he acknowledged that with the NDP’s plan to introduce a carbon tax in 2017, the government will likely not have fiscal or political room to make further tax changes this term.“We’re much more hopeful there will be a major discussion about that heading into the next election,” he said.“It’s something we really have to start having an honest debate about.”McPherson, while acknowledging the fiscal issues facing Alberta, said the NDP’s tax initiatives would be more palatable if it also turned its attention to finding spending cuts.She also questioned whether income tax hikes are the best way to generate revenue, noting there are diminishing returns as high-income earners respond to increased rates by moving income around.The income tax hikes are not the only fiscal changes coming into effect on New Year’s Day. The government’s existing carbon levy on large emitters, which will be superseded by the carbon tax next year, will increase from $15 a tonne to $20 in 2016.jwood@calgaryherald.comRead the article on the Calgary Herald's website

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