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.