Top 20% of income earners pay 'two-thirds' of all income tax revenue: report

According to the Fraser Institute, the top 20% of household incomes pay nearly two-thirds (61.9%) of the country's personal income taxes and more than half (53.1%) of total taxes.

Top 20% of income earners pay 'two-thirds' of all income tax revenue: report
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A new study contradicts a progressive talking point that higher-income Canadians don't "pay their fair share" in taxes when, in fact, the top quintile pays over half of total income taxes.

"In recent years, there have been growing calls to increase taxes on high-income earners based on the belief that they don't pay enough taxes," said Jake Fuss, associate director of fiscal policy studies at the Fraser Institute.

"There's typically little discussion about how much tax each income group pays," he wrote in his report Measuring Progressivity in Canada's Tax System.

According to the institute, the top 20% of household incomes over $243,799 yearly pay nearly two-thirds (61.9%) of the country's personal income taxes and more than half (53.1%) of total taxes.

In contrast, the bottom 20% — who earn up to $59,270 annually — pay only 0.7% of all federal and provincial personal income taxes and 2.0% of total taxes in Canada. 

"Put differently, the share of total income received by the first quintile is more than seven times larger than their share of income taxes paid," stipulates the report.

The institute attributed the country's 'progressive' tax system to why households pay more taxes as their income rises.

However, they contend the policy of boosting tax rates on the top quintile on the basis they are not paying their fair share is predicated on "false reasoning."

For example, families in the second quintile pay 4.6% of all income taxes while receiving 10.1% of all income. The study shows similar patterns within the third and fourth quintiles.

"Just because you think you're going to gain additional revenue from raising taxes doesn't mean it's going to be the case," said Fuss.

The institute said tax increases reduce Canada's competitiveness with other industrialized countries — particularly the U.S. — for highly skilled people such as doctors, scientists, managers, and software engineers.

"If Canadians paid all their taxes up front, they would work the first 169 days of this year before bringing any money home for themselves and their families," added Fuss.

The Canadian Taxpayers Federation (CTF) concurred that the government should reduce wasteful spending before raising taxes to balance the budget.

In 2023, the average Canadian family of two or more people will pay $64,610 in total taxes, representing 46.1% of their annual gross income ($140,106). Last year, the average family paid 45.2% of its income to the government.

According to the CTF, Canadians observed 'significant tax changes' this year. Their "New Year's Tax Changes" report outlined higher CPP and EI premiums by hundreds of dollars, $445 more in carbon taxes — a second carbon tax — and a 6.3% tax increase on booze.

A Leger poll posted earlier this year found over half (52%) of Canadians believe the average family should pay 25% or less of their income to the government. Four in every five support paying the government less than 40% of their income.

"The last thing Canadians need is higher taxes that would encourage people or businesses to leave the country and take their investment dollars with them," said Franco Terrazzano, federal director of the CTF.

"If the feds want to stick it to the well-off, they should stop handing billions of dollars to multinational corporations and stop rubber-stamping bonuses for government executives."

As of June 19, every dollar Canadians earn this year represents a dollar not pocketed by grubby government bureaucrats.

The tax burden compromises more than five months of income — from January 1 to June 18. On June 19, — otherwise known as "Tax Freedom Day" — Canadians start working for themselves.

This year, it comes eight days later than in 2019, the last year before the pandemic, and four days later than 2021, when it fell on June 15.

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  • By Tamara Ugolini

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