The Manitoba government is pledging to cut the payroll tax for an estimated 1,000 employers in the province.

Finance Minister Scott Fielding announced Tuesday that the province will exempt businesses with payrolls under $1.5 million from paying the tax beginning on Jan. 1, 2021. Currently, the exemption threshold is $1.25 million.

The government estimates that 220 employers will no longer have to pay.

The province will also change the brackets for other businesses subject to the payroll tax.

Starting next year, businesses with payrolls between $1.5 million and $3 million will pay a 4.3 per cent tax on the amount within that range. Currently, that tax rate applies to businesses with payrolls ranging from $1.25 million to $2.5 million.

Any business with salary costs exceeding $3 million will pay a 2.15 per cent tax on its total payroll. Currently, every business with a payroll higher than $2.5 million pays the 2.15 per cent tax.

The changes leaves Prairie Architects with an extra $5,000 to spend on operational costs, said Jamie Kozak, a principal at the firm. He joined Fielding at the announcement at Fort Richmond Collegiate, where they are leading a renovation project.

"The exemption will also allow us to consider hiring a summer student, knowing their salary will not cost us an extra 4.3 per cent in payroll tax," he said.

Business groups celebrated the province's decision.

"This is something we've been asking for for decades," said Chuck Davidson, Manitoba Chambers of Commerce president and CEO, who explained many provinces don't tax employers for having a certain number of staff on board.

Finance Minister Scott Fielding, right, hands a pair of steel-toed work boots to Jaycek Valentine, a junior apprentice involved in a renovation project at Fort Richmond Collegiate. The Progressive Conservatives have taken its own spin on the budget shoe tradition by giving a new pair of shoes to someone else, rather than keeping it. (Ian Froese/CBC)

Jonathan Alward with the Canadian Federation of Independent Business called the payroll tax "one of the most punitive, regressive taxes on businesses across the entire country."

Both Davidson and Alward want the province to eventually phase it out.

The tax was created decades ago to fund health and education programs. Without it, NDP Leader Wab Kinew said, he expects more cuts coming to to those areas. He doesn't support the government's changes, he told reporters.

"They're going out and trying to put a happy face on what is actually going to mean cutbacks in schools and hospitals," he said.

Tuesday's announcement of additional tax relief comes one day before the release of the Manitoba government's 2020 budget.

Deflecting concerns over tumbling stock markets and fears of the coronavirus worldwide, Fielding said the spending plan the government will unveil Wednesday is the "most emergency-ready budget" in Manitoba's history.

He said his government has already accounted for these issues by inflating the province's rainy day fund — a reserve fund to be used in case of disasters — by $400 million.

On Tuesday, Fielding also continued his government's pre-budget day tradition of delivering a pair of new shoes — a twist on the tradition of finance ministers buying themselves new shoes before a budget.

This year, the province bought a pair of construction boots for a worker renovating the band room at Fort Richmond Collegiate.