GOLDSTEIN Make the rich pay New reports show in Canada we already do
Author of the article:
Lorrie GoldsteinPublishing date:
Aug 05, 2021 • 36 minutes ago • 3 minute read • Join the conversation Article contentWhile making the rich pay is a constant battle cry from Prime Minister Justin Trudeau and even more so from NDP leader Jagmeet Singh, a new study by the Fraser Institute says we already do.
The report, “Measuring Progressivity in Canada’s Tax Systemâ€, says while the top 20% of income-earning families in Canada making more than $206,267 annually pay almost two-thirds of federal and provincial income taxes (63.2%), and more than half of all taxes (54.7%), their share of total income is only 44.1%.
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Article contentBy contrast, the study by the fiscally conservative think tank, which divides Canadian families into five groups or quintiles based on income, with each group representing 20% of all families, says those in every other income-earning bracket pay a lower percentage of taxes than their share of total income.
“Despite the common misperception that top earners don’t pay their ‘fair share’ of taxes, in reality these households pay a disproportionately large share of the total tax bill,†said study author and economist Tegan Hill.
The bottom 20%, or first quintile of families with incomes of up to $55,600 annually (including families who pay no taxes because their credits and deductions exceed earnings) earn 5.5% of all income, while paying 1.0% of income taxes and 2.3% of all taxes.
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Article contentThe second quintile with incomes of $55,601 to $91,913 annually earn 10.8% of all income while paying 4.7% of income taxes and 7.3% of all taxes.
The third quintile with incomes of $91,914 to $138,698 annually earn 16.2% of all income while paying 10.5% of income taxes and 13.5% of all taxes.
Families in the fourth quintile with incomes of $138,699 to $206,266 annually earn 23.4% of all income while paying 20.7% of income taxes and 22.3% of all taxes.
“The key to understanding ‘fairness’ is comparing the share of income earned by one group compared to their share of total taxes paid,†Hill says. “By this objective measure, the top 20% of income-earning families is the only group to pay a disproportionate share of the total tax burden, compared to their share of income earned.â€
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All of this is consistent with Canada’s progressive income tax system in which high-income families pay comparatively higher rates of taxation than low-income families.
The reason they pay a higher proportion of income taxes than all taxes combined, is that many additional taxes Canadians pay â€" such as federal and provincial sales taxes, municipal property taxes, fuel taxes and tobacco and liquor taxes â€" are not progressively based on income.
The Fraser study says the problem comes when federal and provincial governments treat top income earners as cash cows.
That’s because they are the group best able to relocate to other countries with lower taxes, and to avoid increased taxes through tax planning and tax avoidance, resulting in tax increases raising less revenue than anticipated.
That’s why Trudeau’s 2016 tax hike on top income earners that was supposed to pay for a “revenue neutral†middle class tax cut, ended up being subsidized by all taxpayers.
The same problem would apply to Singh’s proposal to tax “ultra-wealthy families†with fortunes over $20 million, an extra 1% annually.
That said â€" and this is my view â€" nothing changes the fact that the Canada Revenue Agency is notorious for lowering the boom on ordinary citizens while going easy on Canadians illegally evading taxes by hiding money in offshore accounts. That’s something that needs to be fixed.
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