We have frequently heard from the NDP and Liberals about tax fairness. Fortunately, the politics of envy and resentment of the political left is now discredited after years of Trudeau and company. I previously wrote about the so-called “fairness excuse” to justify the change in the capital gains inclusion rate, and it is the lie (as proposed by Deputy Prime Minister Chrystia Freeland) that the government requires only 1.3% of the "wealthy to pay just a little more." .FORSETH: Liberal 'fairness' is not fair, it's a fraud .I have always known that the financial upper half has paid the bills of the lower half along with their own. A successful free enterprise society means, to a lesser degree, that no one is left behind. Freedom, prosperity, and the general welfare of everyone, are partners.That is why Prime Minister Stephen Harper was so dedicated to lowering the GST from 7% to 5%. This tax was especially difficult on lower-income people. In recognition of that dynamic, a GST rebate for lower-income individuals was instituted to cushion the burden. The GST applies to nearly all consumption. Regardless of their ability to pay, consumers bear the tax on almost everything they buy. Additionally, all the extra hidden taxes from various levels of government, such as the carbon tax, are included in the customer price. Personal income tax is a different story, especially given the recent rhetoric from the political left about "paying your fair share." That myth is fundamental to socialism. We should all be more equal (or in fact, equally poor.)It is good to be reminded of what we generally know about taxation and to review it in straightforward terms. Jake Fuss and Nathaniel Li of the Fraser Institute remind us in their new report, "Measuring Progressivity in Canada’s Tax System, 2024."The political left promotes a common misperception that top-income earners do not pay their fair share of taxes and that by increasing tax rates on this income group, the country can generate significant additional government revenue.However, high-income families already pay a disproportionately large share of all taxes. In fact, the evidence reveals that the top 20% of income-earning families pay nearly two-thirds (62.7%) of Canada’s personal income taxes and more than half (54.2%) of total taxes. We should support such financial success, as it benefits the rest of us.In contrast, the bottom 20% of income-earning families are said to pay only 0.8% of all federal and provincial personal income taxes and 2% of total taxes in Canada. This is due to the rising rates of Canada’s tax system, where the share of taxes paid typically increases as income rises. The more one earns, the more one pays, and also at a higher percentage rate.However, excessively raising taxes on high-income earners ignores the economic consequences of such tax rate increases and the associated behavioural responses of taxpayers when faced with higher tax rates or new taxes. In response to a tax increase, many taxpayers change their behaviour in ways that reduce their taxable income through tax planning, avoidance, or evasion, resulting in governments raising less revenue than anticipated. Investments go elsewhere.Tax increases also reduce Canada’s competitiveness with other industrialized countries, particularly the United States. Specifically, increasing taxes for top-income earners makes Canada a less attractive place to live and work for highly skilled people such as doctors, scientists, managers, software engineers, etc.While there can be reasonable debate over the appropriate design of Canada’s tax system, including the role of rising rates (progressivity), the notion that top-income earners do not pay their share of taxes rests on a shaky foundation of myth. The NDP theme of “make the rich pay” hurts everyone.In contrast to the federal government’s expectations, the tax increases that Ottawa imposed on the top income earners in 2016 (Liberal) yielded less revenue than policymakers expected, as the affected taxpayers adjusted their behaviour over time.A similar result is likely if the federal government or certain provinces further increase current tax rates on the top income quintile in the coming years.Average Tax Rates for Total Taxes Paid by Quintile, 2024Income Group Average Tax RateBottom 20% 19.0%Quintile 2 33.6%Quintile 3 42.0%Quintile 4 44.6%Top 20% 53.9%It has been said that one of the fundamental differences between Americans and Canadians relates to the attitude toward personal financial success. Generally in the USA, if someone becomes financially successful, especially if they invent something, create an innovation, or start a new successful brand, then Americans applaud. They say, "How can I get in on this and participate?" Conversely, the more socialist-minded Canadians say they are suspicious. The successful person must have cheated or been somewhat involved in something wrong. Instead of being appreciated, they are denigrated. The NDP-Liberal mentality hurts Canada.In my view, the NDP-Liberals spend too much, tax too much, and we all wind up owing too much. As Pierre Poilievre is fond of saying, Trudeau is not worth the cost.
We have frequently heard from the NDP and Liberals about tax fairness. Fortunately, the politics of envy and resentment of the political left is now discredited after years of Trudeau and company. I previously wrote about the so-called “fairness excuse” to justify the change in the capital gains inclusion rate, and it is the lie (as proposed by Deputy Prime Minister Chrystia Freeland) that the government requires only 1.3% of the "wealthy to pay just a little more." .FORSETH: Liberal 'fairness' is not fair, it's a fraud .I have always known that the financial upper half has paid the bills of the lower half along with their own. A successful free enterprise society means, to a lesser degree, that no one is left behind. Freedom, prosperity, and the general welfare of everyone, are partners.That is why Prime Minister Stephen Harper was so dedicated to lowering the GST from 7% to 5%. This tax was especially difficult on lower-income people. In recognition of that dynamic, a GST rebate for lower-income individuals was instituted to cushion the burden. The GST applies to nearly all consumption. Regardless of their ability to pay, consumers bear the tax on almost everything they buy. Additionally, all the extra hidden taxes from various levels of government, such as the carbon tax, are included in the customer price. Personal income tax is a different story, especially given the recent rhetoric from the political left about "paying your fair share." That myth is fundamental to socialism. We should all be more equal (or in fact, equally poor.)It is good to be reminded of what we generally know about taxation and to review it in straightforward terms. Jake Fuss and Nathaniel Li of the Fraser Institute remind us in their new report, "Measuring Progressivity in Canada’s Tax System, 2024."The political left promotes a common misperception that top-income earners do not pay their fair share of taxes and that by increasing tax rates on this income group, the country can generate significant additional government revenue.However, high-income families already pay a disproportionately large share of all taxes. In fact, the evidence reveals that the top 20% of income-earning families pay nearly two-thirds (62.7%) of Canada’s personal income taxes and more than half (54.2%) of total taxes. We should support such financial success, as it benefits the rest of us.In contrast, the bottom 20% of income-earning families are said to pay only 0.8% of all federal and provincial personal income taxes and 2% of total taxes in Canada. This is due to the rising rates of Canada’s tax system, where the share of taxes paid typically increases as income rises. The more one earns, the more one pays, and also at a higher percentage rate.However, excessively raising taxes on high-income earners ignores the economic consequences of such tax rate increases and the associated behavioural responses of taxpayers when faced with higher tax rates or new taxes. In response to a tax increase, many taxpayers change their behaviour in ways that reduce their taxable income through tax planning, avoidance, or evasion, resulting in governments raising less revenue than anticipated. Investments go elsewhere.Tax increases also reduce Canada’s competitiveness with other industrialized countries, particularly the United States. Specifically, increasing taxes for top-income earners makes Canada a less attractive place to live and work for highly skilled people such as doctors, scientists, managers, software engineers, etc.While there can be reasonable debate over the appropriate design of Canada’s tax system, including the role of rising rates (progressivity), the notion that top-income earners do not pay their share of taxes rests on a shaky foundation of myth. The NDP theme of “make the rich pay” hurts everyone.In contrast to the federal government’s expectations, the tax increases that Ottawa imposed on the top income earners in 2016 (Liberal) yielded less revenue than policymakers expected, as the affected taxpayers adjusted their behaviour over time.A similar result is likely if the federal government or certain provinces further increase current tax rates on the top income quintile in the coming years.Average Tax Rates for Total Taxes Paid by Quintile, 2024Income Group Average Tax RateBottom 20% 19.0%Quintile 2 33.6%Quintile 3 42.0%Quintile 4 44.6%Top 20% 53.9%It has been said that one of the fundamental differences between Americans and Canadians relates to the attitude toward personal financial success. Generally in the USA, if someone becomes financially successful, especially if they invent something, create an innovation, or start a new successful brand, then Americans applaud. They say, "How can I get in on this and participate?" Conversely, the more socialist-minded Canadians say they are suspicious. The successful person must have cheated or been somewhat involved in something wrong. Instead of being appreciated, they are denigrated. The NDP-Liberal mentality hurts Canada.In my view, the NDP-Liberals spend too much, tax too much, and we all wind up owing too much. As Pierre Poilievre is fond of saying, Trudeau is not worth the cost.
