As the year
moves toward the end, and before we get into a frenzy about Christmas shopping
many of us will be thinking about our Tax situation. The Canadian news media is
always awash with coverage of studies purporting to show the growing burden of
taxation, reinforcing a narrative that Canadians are paying high tax rates and
providing, they hope, a justification for tax cuts. A study (THE BRASS TAX Busting
myths about overtaxed Canadians) by done the Broadbent Institute investigates
whether these claims and the popular anti-tax narrative they help underpin,
hold up to statistical scrutiny. The bottom line is they don’t. The following is from the Executive study of this report.
The Brass Tax
looked at key publications on taxation covered extensively by Canadian news
media every year: The Fraser Institute’s annual Tax Freedom Day. That report claims
“average” Canadian families pay a tax rate of over 40%. The Brass Tax study
also looked at the trend highlighted by the Macdonald-Laurier Institute (MLI)
showing that most affluent Canadians are paying a larger share of income
taxes than they were in the past.
Employing more
accurate statistical methods, the Brass Tax found compelling evidence that the
Fraser Institute and MLI findings are problematic and do not provide an
accurate depiction of typical Canadian tax rates.
The study’s
key findings of the Brass Tax Study are:
•
The effective tax rate including income, payroll, and commodity taxes
for the typical Canadian family is 24%, a little over half of the 40% plus
claimed by the Fraser Institute.
•
The typical effective tax rate for a Canadian family, for income tax
only, is 11%.
•
The typical working Canadian individual aged 25 to 54 pays a rate of
approximately 14% in income taxes.
•
Only 20% of working Canadians pay more than 20% of their income as
income taxes.
•
The typical income tax rate for Canadians in the middle of the income
distribution is 10% to 19%. Only 2% of working Canadians pay more than 30%.
•
For Canadians that earn more than $250,000, their average income tax
rate was 29%.
•
The share of
income tax paid by the top 1%, has increased from 12% to 20% over the last 32
years.
§ This is due to their share of all income increasing
from 7% to 10% — a 45%jump.
•
Their income tax rate has, in fact, been falling since2000.
Finally, this study finds
that Canada’s tax revenue relative to GDP is trending downward and is
substantially lower than that of most OECD countries — Canada ranks 25th of 35
member countries.
Much of the media coverage of
taxation gives Canadians the impression that they are paying far more in taxes
then the really do.
Taken together, this study’s
findings undermine the narrative of an undue and growing tax burden for typical
Canadians and provide a cautionary tale for news media that cover these
misleading tax studies and their calls for further tax cuts.
Funny old world. Here in the UK we are waiting to see what the outcome of our election will be where opinion polls showing voting intentions are divided almost equally between the Conservatives who are promising to lower taxes and the others who will raise them. After years of austerity, it is gratifying to see that there are people prepared to support an increase to help pay for the services that benefit society. Alternatively perhaps that support comes only from those who expect to be net beneficiaries. The reality, however, is that we cannot continue to expect to receive free world class health care, education and other services whilst paying less and less for them through the taxation system.
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