Fraser Forum

Most middle-class Canadians have seen their income taxes increase, not decrease

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In a recent Globe and Mail commentary ("Crazy rich Canadians: How to tax the 1%"), noted economist Jack Mintz said “Canada is now disadvantaged in attracting entrepreneurial and skilled labour because of its higher personal tax rates” and “it’s time to have a serious effort at reviewing the tax system to grow the economy and make taxes fair.”

On this we certainly agree.

However, Mr. Mintz also repeatedly trumpeted the federal government’s false narrative that it has cut income taxes for the middle class. For example Mintz notes, “The concerns over inequality led the federal government to raise the top rate by four points to pay for a ‘middle’ income tax cut,” and “they (governments) have hit the rich with new taxes to support more spending or tax cuts for the middle class.”

As our recent study Measuring the Impact of Federal Personal Income Tax Changes on Middle Income Canadian Families found, this is simply not true.

In fact, the vast majority of middle-class Canadian families are paying higher income taxes due to changes made by this federal government. Yes, the federal middle-income personal income tax rate was reduced from 22 to 20.5 per cent, and that did save families money.

But at the same time, Ottawa also scrapped income-splitting for couples with young children and eliminated a series of tax credits including the children’s fitness tax credit, the education tax credit, the textbook tax credit and the public transit tax credit. All of these changes raised income taxes on middle-income families.

The end result—81 per cent of middle-class families in Canada are paying higher income taxes. On average, $840 more a year. And that does not include new carbon taxes or increased CPP payroll taxes.

This year the average Canadian family will pay more than $50,000 in taxes—43.6 per cent of the $115,700 the average Canadian family will earn. When sales taxes and many other types of taxes are added to income taxes, the total all-in tax rate on additional income for many professionals, successful entrepreneurs and highly skilled workers is 70 per cent. When 70 cents of every additional dollar a family earns and consumes goes to pay taxes, hard work and entrepreneurial risk-taking simply doesn’t pay.

So yes, let’s reform and reduce taxes—but let’s not fall victim to the government’s false narrative that it has cut income taxes for middle-income Canadians.

 

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