Canadians pay more income tax than Americans

Taxes are higher at almost every income level according to the Fraser Institute

Canadians pay more income tax than Americans
Steve Randall

With few exceptions, Canadians pay more individual income tax than their American peers.

That’s the finding of a study by the Fraser Institute which has added to the growing chorus of voices calling for a fairer tax system to boost Canadian competitiveness.

“Income taxes are a major attractant—or deterrent—for entrepreneurs, businesses and workers looking to start a business, expand operations or relocate, and at virtually every level of income, Canada’s tax rates are uncompetitive with the US,” said Robert P. Murphy, Fraser Institute senior fellow and co-author of Canada’s Rising Personal Tax Rates and Falling Tax Competitiveness.

How the taxes stack up
At C$50,000 of income: Among all 61 provinces and states in Canada and the US, the highest combined personal income tax rates are in the 10 Canadian provinces, from a high of 37.12% in Quebec to 28.20% in British Columbia.

At $75,000 of income: Eight Canadian provinces are in the top 10, led by Manitoba (37.90%). Ontario ranks 13th highest (29.65%) and B.C. ranks 25th (28.20%).

At $150,000 of income: Again, the 10 highest combined tax rates are in the 10 Canadian provinces, from 41% in Alberta to 50% in Nova Scotia.

At $300,000 of income: Once more, the top 10 highest combined rates at this income level are in the 10 Canadian provinces, ranging from 47% in Alberta to 54% in Nova Scotia.

The rates of course are only part of the equation and many Canadian jurisdictions set the thresholds for each tax band lower than their American counterparts.

So, for example someone with income over C$200,000 in Ontario would pay the province’s combined top tax rate of 53.53% whereas paying the top rate in New York – already lower at 45.82% - would not kick in until income was over U$1 million.

“Competitive personal income tax rates are key to a strong growing economy, and other things being equal, higher personal income taxes deter entrepreneurs, workers, and businesses,” Murphy said. “Policymakers in Canada should evaluate personal income tax rates in Canada with an eye to tax rates paid in neighbouring and competing jurisdictions.”

Canadian taxpayers are also facing greater scrutiny from the CRA with cryptocurrency investments reportedly prompting audits.