High income tax rates take bite out of middle-income New Brunswickers

New Brunswick has some of the highest income tax rates in Canada. And it’s not just a problem for “the rich.” Middle-income residents face higher income tax rates and overall provincial tax bills than most other Canadians earning similar levels of income.

As shown in a new study published by the Fraser Institute, New Brunswickers with market earnings at the national average income level face substantially higher tax rates on the next dollar they earn than people with identical incomes in Ontario and Western Canada.

Let’s look at the numbers. At the national average market income level (in 2022) of $52,750, New Brunswickers face a provincial tax rate of 14.82 per cent on the next dollar they earn compared to 7.7 per cent in British Columbia, 9.15 per cent in Ontario and 10 per cent in Alberta. So clearly, the tax bite on middle-income workers for earning additional money is far higher in New Brunswick than in most of the country.

One way to understand the impact of these different tax rates is to consider (after accounting for both federal and provincial taxes) how much additional income a person must earn to increase their take-home pay by $100. In New Brunswick, to boost their after-tax income by $100, an individual at the national average income must earn an additional $154.60 compared to only $139.30 in B.C.

This tax rate in New Brunswick is so high by national standards that it’s almost identical to rates faced by the highest-income earners in some other provinces. In Saskatchewan and Alberta, for example, CEOs earning $500,000 faces a tax rate of 14.5 per cent and 15 per cent respectively—nearly identical to the tax rate faced by the average national income earner in New Brunswick.

Finally, alongside other factors, these tax rate differences ensure that New Brunswickers earning the national average income face a much higher overall provincial income tax burden than someone with a similar income elsewhere. For example, the provincial income tax bill in New Brunswick ($4,463) for someone earning the national average income is almost twice as large as for someone earning the exact same income in B.C. ($2,353).

Across Canada, governments take a large bite out of the paycheques of middle-income earners, and high-income tax rates mean that governments take a substantial bite out of each additional dollar earned. By reducing tax rates on middle-income residents, the Higgs government could help leave more money in the pockets of New Brunswickers while also reducing the tax bite people face if they work hard to earn extra money.