Tax Cut Better Than a Pay Raise for Poor

Media Appearances, Poverty, Frontier Centre

A report by a Prairie-based accountant and community activist claims that tax cuts help poor people better than raising the minimum wage.

David Pankratz‘s study for the Frontier Centre for Public Policy says that employees have to pay more taxes when the minimum wage is raised, and he says businesses may also decide they don’t need extra employees if it costs more to hire them.

His report concludes that people who are stuck at the bottom of the income ladder can best be helped by raising the provincial tax exemption, which is the base income level a person generates before having to pay taxes.

”If Manitoba and Saskatchewan were to raise their provincial income-tax exemptions to the level used in Alberta, it would represent a minimum wage equivalent to $9.20 an hour,” a release announcing the findings states.

Last March, Manitoba raised its minimum wage 40 cents to $8.50 an hour while Alberta’s is $7.00.

Pankratz, known for his work in war-torn countries on behalf of the Mennonite Central Committee, currently heads up an institute at Canadian Mennonite University.

His 37-page report, entitled ”Which Best Helps the Poor: Minimum Wages, Tax Credits or Tax Exemptions?,” was to be posted online Tuesday at one minute after midnight on the Frontier website.

Wayne Helgason, executive director of the Social Planning Council of Winnipeg, expressed skepticism about the report’s recommendations, saying he thinks higher income earners stand to benefit the most from tax exemptions.

Helgason said the council, which has previously lobbied Manitoba to raise minimum wage levels, recommends tax credits specifically for low-wage workers.

”Raising the exemption, most of the benefit goes to the non-poor. I get that poor people won’t pay tax below that, but also neither will I nor David Asper,” he said, referring to the CanWest Global executive vice-president.