On January 1, 2000 middle-income Albertans will benefit from the fourth phase of Alberta’s tax reduction plan.

"I can’t think of a better way to start off the new year than with a tax cut to those who have been waiting for some tax relief," said Day.

The elimination of the eight per cent surtax has been moved up 18 months. The surtax was imposed in 1987 as a deficit elimination tax on Albertans with incomes over $44,000. However, there hasn’t been a deficit in five years.

The first phase of tax cuts occurred in 1997 with the introduction of the Alberta Family Employment Tax Credit. The AFETC primarily benefits low-income working Alberta families. However, reduced benefits are phased in to middle-income earners up to $50,000.

The second phase was in 1998 and consisted of doubling the AFETC to a maximum of $1,000 per family and reducing the basic tax rate from 45.5 per cent of federal tax to 44 per cent, which benefited all Albertans.

The third phase occurred on July 1 of this year, when Alberta paralleled the federal government’s increase in the basic personal exemption, saving Albertans a total of $75 million in 1999.

This fourth phase is part of the Alberta government’s new tax system, announced in Budget ’99 this March. The last phase will take place on January 1, 2001 with the full implementation of the tax system.

ACCELERATED TAX PLAN

January 1, 2000

As previously announced, the eight per cent deficit-elimination surtax imposed in 1987 on Albertans making more than $44,000 will be eliminated. This move is 18 months ahead of schedule.

January 1, 2001

Alberta will be the first province to unhook itself from the restrictions imposed by the federal tax system.

The new tax system, previously scheduled for implementation on January 1, 2002, will be implemented a full year ahead of schedule. January 1, 2001 is the earliest possible date to unhook as per Alberta’s agreement with the federal government.

Components of the New Tax System

• The province will levy income tax on taxable income (instead of levying tax on federal tax)
• The personal and spousal exemptions will be increased to $11,620 each (from the current $7,131 personal and $6,055 spousal). This move means all Albertans will be able to earn more money before being taxed.
• There will be a single rate of 11 per cent on taxable income
• Alberta will be the first province to eliminate bracket creep as the exemptions will be fully indexed to inflation.
• Over 80,000 low-income Albertans will no longer pay provincial income taxes
• There will still be only one tax return and the federal government will continue to collect personal income tax for Alberta
• The remaining non-refundable credits, such as the age amount, charitable donation amount, and tuition and education amounts, will still be available

Cost of Eliminating the Surtax

One of Alberta’s deficit elimination taxes, the surtax, will be eliminated on January 1, 2000. The cost of eliminating this tax is as follows:

1999-2000    $36 million (the cost of the first three months of the elimination)

2000-2001    $151 million (the full year cost)