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By Charles Lammam
and Hugh MacIntyre
The Fraser Institute

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.

Charles Lammam

Charles Lammam

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.

While the Trudeau government seems preoccupied with income taxes, to properly measure the share of taxes paid by top earners we must look beyond income taxes. Canadians pay a myriad of other federal, provincial and local taxes, including payroll taxes, sales taxes, property taxes, fuel taxes, carbon taxes, profit taxes, import taxes, alcohol taxes and more. A complete assessment of tax fairness must also account for these taxes.

In a recent study, the Fraser Institute measured the distribution of total taxes in Canada. The top 20 percent 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 percent of all federal, provincial and municipal taxes while earning 49.1 percent of the country’s total income.

All other Canadian families, with incomes lower than the top 20 percent, pay proportionally less in total taxes than they earn in income. For instance, the bottom 20 percent pays 1.8 percent of all taxes while earning 4.1 percent of total income.

But what about the top one percent? This group features prominently in discussions of tax fairness and inequality, so let’s look at the amount of taxes these Canadians pay.

Hugh MacIntyre

Hugh MacIntyre

Canadian families in the top one percent pay 14.7 percent of all federal, provincial and local taxes, which is almost 40 percent higher than their 10.7 percent share of Canada’s total income. In fact, the top one percent paid approximately the same amount of taxes as the bottom half of Canadian families (14.6 percent) who collectively earn 20.2 percent of the country’s income.

Not only does the top one percent pay a disproportionate share of the Canada’s taxes, its share has increased over the past two decades – from 11.3 percent in 1997 to 14.7 percent 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 Prime Minister Justin Trudeau’s government.

The imbalance between personal income taxes paid and income earned is even larger for top earners.

The top 20 percent pays nearly two-thirds of all income taxes (64.4 percent) while earning approximately half of all income (49.1 percent). And the top one percent pays 17.9 percent of income taxes while earning 10.7 percent of all income.

Canadians should not be misled by rhetoric on tax fairness – the top earners pay a disproportionate share.

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”?”

Charles and Hugh are Troy Media contributors. Why aren’t you?

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