Who Bears the Tax Burden?
The Fraser Institute's 2023 report highlights that the top 20% of income earners are responsible for 61.9% of the nation's personal income taxes, even though they earn just under half of Canada's total income. These statistics become even more striking when considering the top 10% and 1% of earners, who pay 54.4% and 22.5% of all income taxes, respectively. According to Jake Fuss, director of fiscal studies at the Fraser Institute, these figures demonstrate that high-income Canadians are paying disproportionately more in taxes compared to their share of total income.
Government's View on Fairness
In response, the federal government argues that the current tax system is skewed in favor of the wealthy, particularly regarding capital gains income. The 2024 budget proposal includes an increase in the inclusion rate for capital gains tax from one - half to two - thirds for gains exceeding $250,000 annually for individuals, and on all gains for corporations and trusts. This change aims to adjust the benefits that disproportionately favor wealthier Canadians, affecting only 0.13% of the population with an average income of $1.4 million.
Counterarguments on Tax Fairness
Despite these figures, some experts argue that the data does not capture the full picture of fiscal fairness. Allison Christians, the H. Heward Stikeman Chair in the Law of Taxation at McGill University, points out that top earners often pay a lower percentage of their income in consumption taxes, and can employ sophisticated tax planning strategies to shield their income. Moreover, Clement Nocos from the Broadbent Institute emphasizes the broader context of income inequality, noting that the wealthiest 20% hold over two-thirds of the country’s total net wealth, highlighting a significant wealth gap.
The debate over what constitutes a fair share of taxes in Canada is ongoing and complex. While high-income families do contribute a significant portion of personal income taxes, this does not necessarily equate to a proportionate or fair contribution to Canada's overall financial health. The discussion touches on deeper issues of wealth inequality and the effectiveness of the tax system in addressing these disparities. As policymakers consider adjustments to the tax code, the definition of fairness remains a contentious and central issue.
Source: CBC