Tax relief coming for many residents

Prince Edward Island to move from a three-bracket taxation system to five

A bill introduced in the P.E.I. legislature on May 26 will provide some tax relief for most Prince Edward Islanders and will overhaul the province’s tax bracket system.

One day after tabling a $3.1-billion budget, Finance Minister Jill Burridge tabled changes to P.E.I.’S Income Tax Act on May 26. If passed, the new bill will increase the basic personal amount from $12,750 to $13,500. The new amount will be applied for next year’s tax filings.

The bill will also increase the threshold of the lowincome tax reduction program by $750 for 2023 and 2024 and will increase the tax credit for seniors aged 65 and older.

A children’s wellness tax credit, which provides parents a credit for fees paid for a child’s artistic, recreational or athletic activities, will increase from a maximum of $500 to $1,000 in 2024.

Taken together, the tax relief measures will cost the province $14 million in 20232024 alone.

“This package of measures will leave more money in the pockets of Islanders,” Burridge told the legislature.

The measures, which were described as affordability measures by the King government, were welcomed by the Canadian Taxpayers Federation.

“In recent years, Islanders have been hammered by high inflation and soaring living costs,” said Taxpayers Federation interim Atlantic director Jay Goldberg in a statement.

“It’s good to see the King government recognize those challenges and plan to leave more money in taxpayers’ wallets, where it belongs.”

Goldberg was unhappy the Progressive Conservative government did not index tax rates to inflation.

Goldberg estimated this

“bracket creep” would cost taxpayers up to $263 a year.

The bill will also change the province’s three-bracket tax system to a five-bracket system. Four of the five brackets will also see a modest reduction in income taxes.

Under the current system, Islanders earning $31,984 or less pay a 9.8 per cent income tax. For those between $31,984 and $63,969, it’s 13.8 per cent.

Islanders earning more than $63,969 pay a 16.7 per cent tax rate on income above this level.

But a surtax, applied on higher incomes, has effectively functioned as a fourth tax bracket, Burridge said in an interview.

“In that three-bracket system plus a surtax, people didn’t really ... know that that surtax was there. So, this is a more transparent system,” Burridge said, referring to the five-bracket system.

Burridge also said tax rates will be reduced for four of the five tax brackets. The highest income earners in P.E.I. will pay slightly more, she said.

Burridge said the new tax brackets mirror those in place in most other provinces. She also said the changes would amount to more of a progressive tax system, meaning the rates would increase for higher income earners.

The proposed new tax brackets would be:

• 9.65 per cent for income up to $32,656.

• 13.63 per cent for income between $32,656 and $64,313.

• 16.65 per cent for income between $64,313 and $105,000.

• 18.00 per cent for income between $105,000 and $140,000.

• 18.75 per cent for income over $140,000.

This is the first time since 2008 the province has changed the tax brackets. Burridge says the province will commit to renewing tax brackets annually.

Taken together, the tax changes would result in a savings of $492 for a couple with a yearly income of $45,000 or less, according to P.E.I.’S Department of Finance. A single individual making $46,000 would save about $220 in 2024, as a result of the changes.

A senior couple with a yearly income of $40,000 or less would save about $652, the department said in an email.