10/24/2012 11:34 EDT | Updated 12/24/2012 05:12 EST

Manitoba Tories push tax cut they say would mean extra $200 for each worker

WINNIPEG - Manitoba Opposition Leader Brian Pallister called for a widespread income tax cut Wednesday, and was promptly accused by the government of leaving the door open to a sales tax increase.

Pallister called on the governing NDP to raise the basic personal exemption — the threshold at which people start paying income tax — to $10,617 from the current $8,634.

He said the move would save each income earner $200 a year and bring Manitoba more in line with other provinces. Saskatchewan, for example, starts taxing incomes at $14,942.

"It may not sound like a lot to an ivory-tower inhabitant, but it is a lot to a person who is struggling to make ends meet, and it's a lot to Manitobans who are working to pay the bills at the end of the month," the Progressive Conservative leader said.

The cut would also counter some of the tax increases the NDP implemented in its spring budget, Pallister said, such as hikes on gasoline and insurance.

The NDP government has made several small adjustments to the basic personal exemption since taking office in 1999. But it has fallen behind most other provinces that raise their exemption every year to match the inflation rate.

When asked how he would pay for the tax cut, since the provincial government is already in deficit, Pallister said he could replace Manitoba Hydro's planned BiPole Three transmission line with a cheaper, more direct route. Hydro originally wanted to build the line straight down the east side of Lake Winnipeg, but the province ordered the Crown corporation to reroute the line to the west to preserve a vast stretch of boreal forest. That added hundreds of millions of dollars to construction costs.

Hydro customers, both domestic and foreign, pay for the line, but Pallister said it's the same as tax dollars.

"It's the same borrower; it's the same taxpayer. Let's not pretend that money out of one pocket is different from money out of the other."

Pallister was less specific when asked about other tax issues. Would he index income tax brackets to inflation as most other provinces do? He said a decision would have to wait for talks with party members.

Pallister also wouldn't say whether a Tory government would implement a harmonized sales tax. The federal government has persuaded most provinces to merge their sales taxes with the federal goods and services tax.

"These are issues that we'll address on another day at a more appropriate time," Pallister said.

When asked whether he would enter into talks with the federal government on a harmonized tax, Pallister was vague.

"I'm having discussions with federal officials as soon as next week on a number of topics and I will be meeting with a number of those people. My agenda will be one that I'll share with those people I meet with."

The NDP accused Pallister of leaving the door open to a tax hike.

"He seems to be interested in entertaining the idea of an HST, which would hurt Manitoba families," Finance Minister Stan Struthers said.

"Mr. Pallister has not thought this through."

Manitoba business groups have been pushing for a harmonized tax, which the NDP has ruled out. Companies would no longer pay sales tax on inputs — items they buy for business purposes. But consumers would pay more for many items that are currently exempt from the provincial sales tax, such as fuel, children's clothing and tickets to movies and sporting events.

A 2009 analysis by the provincial Finance Department said the HST would save businesses $510 million annually, but leave consumers paying $405 million more each year. The provincial treasury would be out at least $105 million a year — more if it offered low-income HST rebates and implemented other measures such as Ontario, British Columbia and other harmonized provinces have done.