Fraser Institute News Release: Low- and middle-income Canadians hit hardest by high marginal effective tax rates
23 Abril 2024 - 4:00AM
Canadian families and individuals with annual incomes between
$30,000 and $60,000 face marginal effective tax rates near or above
50 per cent, finds a new study published by the Fraser Institute,
an independent, non-partisan Canadian public policy think-tank.
“Canadian families with modest incomes face high marginal
effective tax rates, often higher rates than Canadians in top
income tax brackets,” said Jake Fuss, director of fiscal studies at
the Fraser Institute, which published Marginal Effective
Tax Rates for Working Families in Canada by Philip Bazel,
an associate at the School of Public Policy at the University of
Calgary.
The marginal effective tax rate (METR) measures the personal
income taxes paid (federal and provincial) and the reductions in
government benefits, resulting from earning an extra dollar. For
example, the Canada Child Benefit, a monthly payment, is reduced as
family income increases. In other words, the effective tax rate is
the combination of taxes you pay and benefits you lose as you make
more money.
Crucially, across the provinces, individuals and families with
relatively modest incomes face the highest rates. This
unfortunately creates a disincentive for earning additional income,
as the financial benefits are significantly offset by increased
taxes and/or reduced government benefits.
Canadian families with modest incomes, particularly those
earning between $30,000 and $60,000, face the highest marginal
effective tax rates. For example, families earning a household
income of $60,000 are subject to an effective tax rate of 50 per
cent or higher in every province. In Quebec, the METR is as high as
67 per cent at this income level.
Among provinces, BC has the lowest rate (38 per cent) averaging
across the $30,000 to $60,000 bracket. Ontario’s rate for the
$30,000 to $60,000 bracket is 6 percentage points higher (50 per
cent) than high-income families at $300,000 or higher (44 per
cent).
“Families with modest income brackets consistently face
disproportionately high METRs, raising questions of fairness and
efficiency in the tax and transfer system,” Bazel said.
“These findings highlight the need to prioritize METR reductions
for low-income families.”
MEDIA CONTACT:
Philip Bazel, Senior FellowFraser Institute
Jake Fuss, Director, Fiscal StudiesFraser Institute
To arrange media interviews or for more information, please
contact:Drue MacPherson, 604-688-0221 ext. 721,
drue.macpherson@fraserinstitute.org
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The Fraser Institute is an independent Canadian public policy
research and educational organization with offices in Vancouver,
Calgary, Toronto, Montreal, and Halifax, and ties to a global
network of think-tanks in 87 countries. Its mission is to improve
the quality of life for Canadians, their families and future
generations by studying, measuring and broadly communicating the
effects of government policies, entrepreneurship and choice on
their well-being. To protect the Institute’s independence, it does
not accept grants from governments or contracts for research. Visit
www.fraserinstitute.org