Big Tax Cuts: A Seismic Shift in Manitoba

Evelyn Jacks

Provincial Budget Season continues, and while the Yukon Territories had no new income tax measures to announce on March 2, Manitoba made a seismic shift, introducing significant personal tax cuts in their March 7 budget. Specifically, the Basic Personal Amount increased 38% to match the federal amount of $15,000 in 2023. If passed, the budget will bring inflation-fighting relief to Manitobans who will see reduced withholding taxes starting July 1. Further, tax brackets will move up 27.5% in the lowest tax bracket and 25.5% in the middle tax bracket in 2024.  Details below:

The Personal Amounts. The Basic Personal Amount is the only one to change and continue to be indexed moving forward.  The result of the personal amounts will remain at the current level. This change is expected to reduce taxes by $524 per person in 2023.

The New Tax Brackets.  On deck for 2024, the following change will occur:

In other news, the Mineral Exploration Tax Credit and the Green Energy Equipment Tax Credit became permanent and the exemption from paying the Health and Post-Secondary Education Tax Level moved from $2 million in payroll to $2.25 million; a reduced levy will apply to payrolls of $4.5 million, this making businesses much happier as well.  New types of remuneration will qualify for the Interactive Digital Media Tax Credit.

For homeowners, the School Tax rebate will increase to 50% to an average rebate of $774 in 2023.  New measures applied to health care, education funding and for the disabled.

In its midterm economic report, released December 20, Manitoba forecasted:

• Deficit  of $363 million – higher than the $355-million improvement predicted in December but still lower than the deficit of $548 million projected in Budget 2022.
• Revenue of $21.5 billion, an increase over the budget estimate of $19.4 billion last year,  due to higher net income for government business enterprises, and improvements at Manitoba Hydro due to high water levels and higher tax revenues.
• are projected to be $21.8 billion, higher than the budget forecast of $19.9 billion, largely due to health-care system improvements, support for Ukrainian temporary residents, and economic recovery and affordability measures including the Family Affordability Package, the Minimum Wage Adjustment Program and the Food Security Fund.
• Debt to GDP ratios hovering in the 34.6% ranged; lower than last year’s 35.9%.  Real GDP is expected to slow to 1.4% in 2023 from 3.7% in 2022
• Borrowing requirements are $4.75 Billion.  Manitoba’s gross debt is $58 Billion; net debt is $31 billion

Threats:

• Rising interest rates, with eight Bank of Canada rate increases in 2022 and the last one in January, which raised the overnight rate to 4.25% - the Bank’s highest interest rate since 2007 – Manitoba is concerned.  Each 1% increase in debt servicing costs takes $32 Billion away from other services   
• Global economic uncertainties:  aggressive interest rate increases, inflation, war, supply chain interruptions

Opportunities:

• Manitoba’s projected economic growth ranks third highest in the country and best amongst non-resource-based provinces.
• The provincial unemployment rate is at 4.6%, among the lowest rates in the country. Inflationary pressures have eased slightly, falling to 8.4 per cent growth in October, after peaking in June at 9.% growth year-over-year at a near 40-year high, the Minister noted.

2023 Provincial Budget Dates