‘Fair­ness’ rhetoric masks tax im­bal­ance

Waterloo Region Record - - EDITORIALS & COMMENT - Charles Lam­mam and Hugh MacIn­tyre Charles Lam­mam and Hugh MacIn­tyre are co-authors of the Fraser In­sti­tute study “Mea­sur­ing the Dis­tri­bu­tion of Taxes in Canada: Do the Rich Pay Their ‘Fair Share’?”

For months, the Trudeau gov­ern­ment has used the term “tax fair­ness” to jus­tify higher taxes on en­trepreneurs and in­cor­po­rated pro­fes­sion­als.

While what’s a fair dis­tri­bu­tion of taxes is never de­fined by the gov­ern­ment, such rhetoric fu­els the mis­per­cep­tion that Canada’s top earn­ers col­lec­tively get away with pay­ing very lit­tle tax. And if that were true, it would cer­tainly be cause for con­cern.

The re­al­ity, how­ever, is quite dif­fer­ent. Canada’s top earn­ers pay a dis­pro­por­tion­ate and grow­ing share of the coun­try’s taxes.

An ob­jec­tive way to as­sess fair­ness is to com­pare the share of to­tal taxes paid by top earn­ers to the share of to­tal in­come they earn. If these shares are pro­por­tional, then this sig­nals a fair dis­tri­bu­tion of taxes.

In a re­cent study, the Fraser In­sti­tute mea­sured the dis­tri­bu­tion of to­tal taxes in Canada. The top 20 per cent of in­come-earn­ing fam­i­lies is the only group that pays a big­ger share of taxes than the share of in­come they earn. They pay 55.6 per cent of all fed­eral, provin­cial and mu­nic­i­pal taxes while earn­ing 49.1 per cent of the coun­try’s to­tal in­come. All other Cana­dian fam­i­lies, with in­comes lower than the top 20 per cent, pay pro­por­tion­ally less in to­tal taxes than they earn in in­come. For in­stance, the bot­tom 20 per cent pays 1.8 per cent of all taxes while earn­ing 4.1 per cent of to­tal in­come.

But what about the top one per cent? Cana­dian fam­i­lies in the top one per cent pay 14.7 per cent of all fed­eral, provin­cial and lo­cal taxes, which is al­most 40 per cent higher than their 10.7 per cent share of Canada’s to­tal in­come. In fact, the top one per cent paid about the same amount of taxes as the bot­tom half of Cana­dian fam­i­lies (14.6 per cent) who col­lec­tively earn 20.2 per cent of the coun­try’s in­come. Not only does the top one per cent pay a dis­pro­por­tion­ate share of the Canada’s taxes, its share has in­creased over the past two decades — from 11.3 per cent in 1997 to 14.7 per cent to­day.

By the ob­jec­tive fair­ness stan­dard of pay­ing taxes pro­por­tional to the share of in­come earned, rais­ing taxes on Canada’s top earn­ers can’t be jus­ti­fied. Par­tic­u­larly when it comes to per­sonal in­come taxes, the fo­cus of Trudeau’s gov­ern­ment.

The im­bal­ance be­tween per­sonal in­come taxes paid and in­come earned is even larger for top earn­ers. The top 20 per cent pays nearly two-thirds of all in­come taxes (64.4 per cent) while earn­ing about half of all in­come (49.1 per cent). And the top one per cent pays 17.9 per cent of in­come taxes while earn­ing 10.7 per cent of all in­come. Cana­di­ans should not be mis­led by rhetoric on tax fair­ness — the top earn­ers pay a dis­pro­por­tion­ate share.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.