Higher income taxes are discouraging entrepreneurship

Higher income taxes are discouraging entrepreneurship

Higher income taxes are discouraging entrepreneurship

Canada’s provincial governments are discouraging entrepreneurs from starting businesses due to higher income taxes.

A new study from the Fraser Institute concludes that hundreds of businesses aren’t started because entrepreneurs consider their tax burden makes it less attractive to take the inherent risk of a new business.

“When governments raise the top personal income tax rate, they discourage entrepreneurs from taking risks and starting new businesses, which are vital for economic growth and prosperity and drive innovation,” said Charles Lammam, director of fiscal studies at the Fraser Institute.

The study looked at data from 30 years (1984-2015) and focused only on provincial income taxes.

It found that the largest number of businesses not started due to a 1 percentage point increase in income tax was in Ontario (696) while just 14 were discouraged in Prince Edward Island.

“When governments raise the top personal income tax rate, they discourage entrepreneurs from taking risks and starting new businesses, which are vital for economic growth and prosperity and drive innovation,” said Charles Lammam, director of fiscal studies at the Fraser Institute.

The number of businesses not created over a four-year period due to a one percentage point increase to the provincial top personal income tax rate (by province):

Ontario 696

Quebec 465

British Columbia 315

Alberta 275

Saskatchewan 85

Manitoba 74

Nova Scotia 62

New Brunswick 54

Newfoundland and Labrador 40

P.E.I. 14


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