The federal government is peeling back a decades-old tax break for certain elected officials, including Edmonton's city councillors.

Council members don't pay taxes on a third of their income, a sum not reflected in their $98,362 salaries.

Other elected officials in Canada can leave up to half their income untaxed. These 'non-accountable allowances' are meant to cover the expenses of public service work.

As part of the 2017 federal budget, Ottawa eliminated the allowances by merging them with income. Specific employment expenses, filed with receipts, will remain non-taxable.

The measure affects elected members of provincial and territorial legislatures, as well as municipalities. Elected officials of municipal utilities boards, commissions and corporations will also be subject to the rule, as will members of school boards.

Behind the times

"We're happy to see it gone," said Scott Hennig, a spokesperson for the Canadian Taxpayers Federation.

"It does a disservice explaining to Edmontonians and other citizens across the country as to how much their politicians are actually making."

Hennig estimates the hidden allowance boosts Edmonton city councillors' incomes by up to $30,000 a year. 

"They really have been dragged kicking and screaming to this," he said. "Edmonton's really been behind the times when it comes to this transparency and this perk that they've been receiving."

A third-party committee will recommend how the new policy should be implemented in Edmonton. Namely, whether councillors should get a raise to make up for the lost tax break.

"We haven't considered that fully yet, to be honest," said Edmonton Mayor Don Iveson.

"We'll want to understand what the independent take is on how to flow that through."

'Unfortunate consequence'

Calgary's city council eliminated its tax exemptions a decade ago and could act as a blueprint for Edmonton's transition, he added.

"If we did the same as Calgary, then the unfortunate consequence is a couple hundred-thousand more in taxes that are collected from members of council," Iveson said.

The measure won't be implemented until 2019 in order to give affected organizations time to adjust compensation.

Andrew Knack

Coun. Andrew Knack says he supports the elimination of non-taxable allowances for elected politicians. (CBC)

Coun. Andrew Knack said the changes are unlikely to affect Edmonton's current city council, which is near the end of its term. The municipal election is in October.

"In the past, they've struck these committees and council has accepted the recommendations to take effect at the beginning of the next council term," Knack said in a phone interview.

"The idea is to try and make sure that there's no potential conflict in that regard."

Knack, who hopes to be re-elected, says he's in favour of ending councillors' tax breaks. 

"It's not that there was ever anything that they were trying to hide or be sneaky about," Knack said. 

"It's just so much cleaner to say, 'This is what a councillor makes, these are their benefits, it's fully taxable.' "

With files from Janice Johnston and Lydia Neufeld