Yellowknife (Dec 06/04) - Taxes for low income and middle income earners in the territories are about to go down, while taxes for higher income earners have already gone up.

As of Jan. 1, taxpayers earning up to $33,811 will see their personal income tax decrease from 7.2 per cent to 5.9 per cent. Taxes on wages earned in the second tax bracket, running from $33,811 to $66,492, will be reduced from 9.9 per cent to 8.6 per cent.

Changes for these two lower tax brackets will be implemented Jan. 1, while increases on the top two tax brackets came into effect as of July 1, 2004.

The effective increase for the top two brackets is an average of the 2003 and 2005 rates.

In the $67,622 to $109,393 bracket, taxpayers will pay 11.95 per cent for the 2004 tax year. In the 2005 tax year, wages in this tax bracket increase again, to 12.2 per cent.

Wages earned above $109,393 will be taxed at a rate of 13.55 per cent in 2004 and 14.05 per cent in 2005.

While personal income tax on wages up to $67,622 will be reduced, at the same time a corresponding increase in payroll taxes takes effect Jan. 1.

John Monroe, director of fiscal policy with the territorial department of finance, said the payroll tax will bring in an extra $12.4 million overall for the territorial government.

Originally introduced in July 1994, the payroll tax was to be the territorial government's way of taxing people working in the Northwest Territories but not living here.

While the government will be collecting $12.4 million more as a result of the payroll tax increase, the lowering of rates on the first two tax brackets will cost the territorial government $7.2 million.

A corresponding one per cent increase in the cost of living tax credit, which gives money back to taxpayers, will cost the territorial government another $3.2 million.

When the dust settles from all the tax changes, the territorial government will net $2 million a year.

Monroe said the payroll tax "will be collecting more, though the intent is, people who live outside the territories will pay more. Inside the territories, it will depend. Most people earning under $85,000 will be either better off or pay approximately the same amount of tax."

Working people living in the Northwest Territories will feel the effects of the tax changes in different ways, depending on their income.

Megan Beam, an accountant with Charles Jeffery C.A., confirmed that, apart from federally-borne tax credits, an employee earning $30,000 in wages will pay $210 less in territorial taxes in 2005. A taxpayer earning $70,000 in wages will pay $322.72 less, but an employee earning $100,000 in wages will pay an additional $127 in territorial taxes.