Thank you, Mr. Speaker. My questions will be directed towards the Premier. In my Member’s statement I talked about the northern residents tax deduction.
My question would be to the Premier as such, which is: When is the last time this government or any recent previous government has requested an increase to the northern tax deduction, and if there has been one in recent years, would he have anything to substantiate that so we could see what type of letter or correspondence on the particular issue has been done and certainly what work has been made on this particular issue that can help the working poor and certainly make a big difference in the everyday family’s bottom line? Thank you.
Thank you, Mr. Hawkins. The honourable Premier, Mr. McLeod.
Thank you, Mr. Speaker. On January 1, 2008, the northern residents deduction was increased 10 percent, from $5,475 to $6,022.50, the first increase since 1991. Our government has been working with the governments of Nunavut and Yukon to look at requesting an increase in the northern resident deduction. Three territorial Finance Ministers reviewed this, and on October 31, 2012, the Finance Ministers reported to the Northern Premiers’ Forum and also outlined a possible work plan.
Their report noted that increasing the northern resident deduction would decrease personal income tax revenues for federal, territorial and some provincial governments. It would not benefit low-income families and would only benefit high-income northern taxpayers. In addition, we would require the support of six provinces whose northern residents also receive the northern resident deduction would need to be reconfirmed. At the time, we decided it was not in the best interest of our low-income families to pursue this. Thank you, Mr. Speaker.
Mr. Speaker, what analysis really is broken out of this low-income factor? The Premier is right; it’s more than one jurisdiction. As a matter of fact, there is the A-base and there is the B-base, and the A-base, for sake of illustration, is the three territories. The B-base, which is a lesser tax deduction, affects places like northern Alberta, northern Saskatchewan and works its way across Canada. But with that illustration, we should be really asking ourselves, how do we encourage people to live here in the Northwest Territories, and by waving off those folks for whom this could make a difference is certainly staring down the situation in the wrong way.
What analysis do we really know? What type of impact? Would our government be prepared to do that type of analysis to find out would it still benefit all Northerners at large? If you don’t have a paycheque, it doesn’t matter what the tax deduction is. It’s the working poor and those people trying to continue to find the North still attractive. That analysis is critical. I look forward to the Premier’s answer on that particular effort. Thank you.
The tax collection agreement between the Northwest Territories and Canada requires that both jurisdictions use the same definition of taxable income. A northern resident deduction increase would reduce federal and territorial personal income tax revenue. In our forensic review, the 2008 increase in the northern resident deduction raised the maximum deduction to $6,022.50. At the highest combined federal and territorial tax rate of 43.5 percent, the $547.50 increase would provide annual savings of $235 for tax filers claiming the maximum $6,022.50. The Government of the Northwest Territories’ annual costs for this federal tax measure is about $800,000 per year.
Undoubtedly, a northern resident deduction increase would provide an incentive for people to stay in the North, but we’ve looked at the numbers. Say we wanted to get the federal government to increase the northern resident deduction by $700 a year. Let’s say we go from $6,022.50 to $6,728. The estimated cost to our government is $720,000. Let’s say we want to increase it even further from $6,022.50 to $8,500. It’s going to cost our government an extra $2.46 million a year.
I’m a little confused on the particular part about it actually particularly causing our government grief, if not financial, on the money on the bottom line. Maybe the Premier can illustrate why it actually costs us money when it’s a federal tax credit. That’s the area we should be arguing for. At the same time, this could be what starts to underpin successful growth in our territorial population, because right now we have very little.
The Premier, I think, said earlier today that we subsidize to the tune of $190 million. In that range. I mean, the exact number is not so important at this second, but the point is that we’re trying to find ways to grow our population. This is certainly one that would help those who can certainly make some money. Has the Premier considered that? We don’t need the permission of the other six provinces. We need Ottawa’s permission on this type of initiative.
The reason it costs us money is it reduces the amount of personal income tax that we collect. For example, the 2008 increase, since the claimed amount must be the lesser of the maximum allowable of $6,022.50 and 20 percent of net income, taxpayers with net income of less than $30,115 will not benefit from a northern resident deduction increase.
Thank you, Mr. McLeod. Final, short supplementary, Mr. Hawkins.
Thank you, Mr. Speaker. I appreciate the answer from the Premier. I mean, it certainly goes a long way of appreciating the complexity of this issue. The bottom line is, how are we putting more money in Northerners’ pockets? It had been frozen at approximately $5,400 for decades and finally migrated by 10 percent to just above $6,000 in 2008. The bottom line is, how do we get money in Northerners’ pockets, because we know more money in a family’s pocket is really going out into the community to buy that Klik, my colleague from the Sahtu had said, whether it’s buying gasoline for their skidoos, or buying their children presents and helping to pay that costly rent and stuff. It’s initiatives like this the Government of the Northwest Territories can shelter the cost of it a little better by letting working people keep some of their working money.
Would the Premier re-examine it from that analysis, that if we can get more money in Northerners’ pockets, no doubt they’ll be spending it in our economy where it’s exactly where we would be doing it anyway?
That is our objective and we want to get more money in Northerners’ pockets. We’re always being very vigilant in this area as well as looking in other areas such as reducing energy costs, so the Energy Charrette, we expect, will go a long ways to that end as well.
Thank you, Mr. McLeod. The Member for Deh Cho, Mr. Nadli.
