Rising taxes on highly skilled, educated hurt competitiveness
Fraser Institute study says combined federal/provincial rates second highest in G7.
VANCOUVER — Rising federal and provincial personal income tax rates on highly skilled, educated workers are hurting Canada’s economic competitiveness, concludes a study by the Fraser Institute.
The policy think-tank’s study, Canada’s Rising Personal Tax Rates and Falling Tax Competitiveness finds the top combined federal and provincial tax rate, which is 53.5% (using Ontario’s rate) is sixth highest among 34 industrialized countries. It’s second highest among G7 countries, behind France (based on 2014
Canada’s Liberal government has introduced a new income-tax bracket, increasing the top federal tax rate to 33% from 29%. This increase adds to recent top rate increases in Ontario, Alberta and other provinces.
Nova Scotia has the highest combined rate at 54%, followed by Ontario (53.5%) and Quebec (53.3%). Currently, six of 10 provinces have a top combined rate above 50%.
“A highly skilled worker in Ontario can now lose more than 50 cents of every additional dollar they earn in labour income – hardly an attractive environment for highly skilled workers and entrepreneurs,” said Ben Eisen, co-author and associate director of provincial prosperity studies at the Fraser Institute.
BC and New Brunswick, have started to reduce their top rate to counteract the effect on their tax competitiveness.
The study also notes that Canada’s top tax rates often apply to lower levels of income than is the case in other countries, which further erodes the country’s tax competitiveness.
“In comparisons at multiple income levels, Canada’s personal income tax rates are decidedly uncompetitive compared to those in the US, putting Canada at a real disadvantage in attracting and retaining skilled and mobile workers,” said Charles Lammam, director of fiscal studies at the Fraser Institute and study co-author.