菲沙研究所-2020年加拿大个人税率上升和税收竞争力下降（英文）-2020.8-52页_934kb

Summary of Canada’s Rising Personal Tax Rates and Falling Tax Competitiveness, 2020

Core Content

This document examines the changes in Canada's personal income tax rates from 2009 to 2019, focusing on how these increases have affected the country's tax competitiveness, particularly in comparison to the United States and other OECD countries. It highlights the economic implications of higher marginal tax rates on upper-income earners and the potential unintended consequences of these policies.

Main Points

• Tax Rate Increases: Since 2009, every Canadian province (except Manitoba and Prince Edward Island) has increased its top personal income tax rate at least once. The federal government introduced a new top tax bracket in 2016, raising the rate from 29% to 33% on incomes over $200,000.

• Provincial Increases: Alberta had the largest increase in combined top tax rates (9 percentage points or 23.1%), followed by Ontario (7.1 percentage points or 15.3%) and Quebec (5.1 percentage points or 10.6%). The combined federal and provincial top tax rate has increased in every province since 2009.

• Impact on Tax Competitiveness: Canada's top marginal tax rates are generally higher than those in the U.S. and many other OECD countries. At the $300,000 income level, all Canadian provinces have higher marginal tax rates than any U.S. state, except Alberta. At lower income levels like $50,000 and $75,000, the disparity is also significant.

• Economic Consequences: High marginal tax rates discourage productive economic activity by reducing the reward for additional income. This can hinder economic growth and the ability to attract and retain skilled labor, investment, and entrepreneurs.

• Revenue Expectations: Tax increases are unlikely to generate the expected government revenue due to behavioral responses from taxpayers, especially high-income earners, who may reduce their taxable income or move to other jurisdictions.

Key Information

• Tax Rate Trends:

  • Nova Scotia started the trend in 2010 by introducing a new bracket for incomes over $150,000.
  • Ontario and Quebec followed with similar changes in 2012 and 2013, respectively.
  • Alberta introduced five tax brackets in 2015, significantly altering its tax structure.
  • Saskatchewan reduced tax rates across all brackets in 2017.
  • New Brunswick and Newfoundland & Labrador increased tax rates in some brackets.

• Comparative Analysis:

  • In 2018, Canada had the 7th highest combined top marginal tax rate among 36 OECD countries.
  • The 2016 federal tax change worsened Canada's competitive position compared to the U.S., which had undergone significant tax reforms in late 2017.
  • Nova Scotia, Ontario, and Quebec had the highest combined top tax rates among Canadian provinces in 2019.

• Income Thresholds:

  • The income level at which the top tax rate is applied varies widely across provinces, from $70,610 in Manitoba to $314,928 in Alberta.
  • These thresholds are critical for assessing tax competitiveness, as they determine the point at which higher tax rates apply.

• Tax Brackets and Rates:

  • Table 1 and Table 2 summarize the changes in tax brackets and rates across provinces from 2009 to 2019.
  • Alberta added four new brackets, while most provinces added one or two.
  • Quebec's tax rates are adjusted downward due to the federal abatement, which reduces the effective tax burden for Quebec residents.

• Behavioral Response:

  • Taxpayers, especially high earners, tend to respond to higher tax rates by altering their behavior, such as reducing work hours or moving to lower-tax jurisdictions.
  • This can lead to lower-than-expected tax revenues and negatively impact economic growth.

Conclusion

The document argues that Canada's rising personal tax rates, particularly on upper-income earners, have made its tax system less competitive compared to the U.S. and other OECD countries. It emphasizes the need for policymakers to consider the economic impact of these changes and potentially reverse the trend towards higher marginal tax rates to improve competitiveness and encourage economic activity.