Ontarians face some of the highest income tax rates in North America

With the recent release of its 2024 budget, the Ford government once again failed to address Ontario’s lack of tax competitiveness—six years after the government promised to do so.

And that’s bad news for Ontarians. According to a new study published by the Fraser Institute, Ontario in 2023 had the third-highest top combined (that is, federal and provincial) personal income tax rate in Canada and the United States at 53.53 per cent.

Ontario’s taxes are also similarly uncompetitive at lower levels of income. For example, an individual earning C$150,000 per year faces a higher personal income tax rate in Ontario than anywhere in Canada and the U.S. (except Quebec and Nova Scotia). And an individual making C$50,000 per year faces a higher income tax rate in Ontario than in every U.S. state. Clearly, Ontarians across all income levels face some of the highest tax rates on the continent.

There’s a similar story in other provinces. At every income level measured in the study, Canadian provinces occupied eight out of the top 10 spots for the highest tax rates. This means that across all income levels, Americans generally face lower personal income tax rates than Canadians.

But why is this a problem for Ontario? Aside from Ontarians having less money in their pockets, high personal income tax rates also hinder economic growth.

For example, high tax rates can discourage high-skilled productive workers from living in Ontario. Skilled individuals, such as doctors and entrepreneurs, contribute significantly to the economy yet are often the most sensitive to tax rates, which means they’re less likely to move to (or remain in) a jurisdiction that has relatively high tax rates. In general, high taxes also reduce people’s incentive to engage in productive economic activities (working and investing) as they receive less reward for doing so.

On the campaign trail in 2018, Ontario’s Progressive Conservatives talked a big game about the need to reduce taxes. Then-candidate Doug Ford claimed that government was “the worst place you can hand your money over.” And Vic Fedeli—the Ford government’s first finance minister—often criticized previous Liberal governments about Ontario’s high top income tax rate relative to other provinces, U.S. states and OECD countries. Indeed, in its election platform, the Ford campaign promised to cut middle-income taxes by 20 per cent.

Yet despite these promises, since getting elected the Ford government has delivered no meaningful tax relief for Ontarians. Again, the government’s recent budget left Ontario’s uncompetitive personal income tax rates untouched.

The Ford government’s decision to maintain the status quo means Ontarians will keep less of their hard-earned money, economic growth will suffer because people have less incentive to work and invest, and the province will have a harder time retaining and attracting high-skilled workers.