Provincial tax revenue relative to the size of the economy has increased
Residents in Canada’s largest provincial economy will have seen their tax burden increase in the 2024/25 tax year and a report is calling for cuts to boost growth.
Fraser Institute senior fellow Ben Eisen says that Ontario’s tax burden per person has increased to $9,406 from $9,307 in the previous tax year and is around $700 higher than it was in the final year of the previous provincial government ($8,736 in 2017/18), despite pledges to cut taxes by the current administration.
In a report titled Pro-Growth Options for Shrinking the Tax Burden in Ontario, Eisen is calling for tax cuts to boost growth in the province.
"Lowering taxes is one way Queen's Park could boost economic growth, attract more investment and let Ontario workers keep more of their own money," he said.
On an inflation adjusted basis, Eisen calculates that Ontario’s tax revenue compared to the size of the economy (GDP) has increased from 12.1% in 2017/18 to 13% in 2023/24 and is projected to be 13.4% for 2024/25.
His research suggests that the government has capacity to cut taxes, such as eliminating the top two tax brackets at a cost of $5 billion. But the report also suggests that there is room to be even more ambitious and eliminate the temporary tax increases from 2012 as well as the two high-income surtaxes of 20% and 36% that are applied to high incomes. It also suggests CIT should be reduced to 8%, matching Canada’s lowest rate applied in Alberta.
While this would reduce the percentage of tax revenue relative to GDP to 11.6%, this would be just 0.5 percentage points below where it was in 2017/18, the study says.
"Pursuing pro-growth tax reform would benefit the province in several ways, including greater economic growth, more business investment and a lower tax burden for Ontario workers.," Eisen said.
Taxation is expected to be addressed at a federal level under the new Carney government, with a pledge to scrap the carbon tax and planned changes to capital gains tax.
