A new study suggests high-income earners are already bearing the brunt of taxes across Canada
Whether it’s about small businesses or offshore havens, a lot of discussions on tax have revolved around the idea of Canada’s wealthiest not paying enough. But according to a newly released study, that’s not the case at all.
“Despite rhetoric to the contrary, the reality is that Canada's top earners already pay a disproportionate share of the taxes, and that share has grown over the years,” said Charles Lammam, director of fiscal studies at the Fraser Institute and co-author of a new report on the distribution of taxation and income in Canada.
According to the report, the top 20% of Canadian households in terms of income — those with annual incomes exceeding $186,875 — will earn 49.1% of all income in Canada but pay 55.9% of all taxes, including income, payroll, sales, and property taxes. The top 1% of earners face an even starker discrepancy, earning 10.7% of all income but paying 14.7% of all taxes in 2017 (compared to 11.3% in 1997).
Focusing solely on income taxes, the top 1% are expected to pay 17.9% of all federal and provincial income taxes, whereas the bottom 50% will pay just 9% of all income taxes this year.
Looking at income and taxation trends over time, the institute found that the tax ratio gap has been increasing because of the progressivity of Canada’s personal income tax system. It warned that higher tax rates would erode Canada’s tax competitiveness, discourage economically productive activities, stifle the country’s ability to attract and keep top talent, and dampen incentives for income mobility.
“Once that happens, everyone is hurt, particularly those, ironically enough, whom the misguided policies are intended to help,” the institute said.
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Proposed provincial law cuts tax rate for businesses
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“Despite rhetoric to the contrary, the reality is that Canada's top earners already pay a disproportionate share of the taxes, and that share has grown over the years,” said Charles Lammam, director of fiscal studies at the Fraser Institute and co-author of a new report on the distribution of taxation and income in Canada.
According to the report, the top 20% of Canadian households in terms of income — those with annual incomes exceeding $186,875 — will earn 49.1% of all income in Canada but pay 55.9% of all taxes, including income, payroll, sales, and property taxes. The top 1% of earners face an even starker discrepancy, earning 10.7% of all income but paying 14.7% of all taxes in 2017 (compared to 11.3% in 1997).
Focusing solely on income taxes, the top 1% are expected to pay 17.9% of all federal and provincial income taxes, whereas the bottom 50% will pay just 9% of all income taxes this year.
Looking at income and taxation trends over time, the institute found that the tax ratio gap has been increasing because of the progressivity of Canada’s personal income tax system. It warned that higher tax rates would erode Canada’s tax competitiveness, discourage economically productive activities, stifle the country’s ability to attract and keep top talent, and dampen incentives for income mobility.
“Once that happens, everyone is hurt, particularly those, ironically enough, whom the misguided policies are intended to help,” the institute said.
Related stories:
Proposed provincial law cuts tax rate for businesses
Why Canada's tax system is at risk of being uncompetitive
