Contrary to rhetoric, many Canadians don’t support raising taxes on the ‘rich’

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Appeared in the Vancouver Province, July 15, 2023
Contrary to rhetoric, many Canadians don’t support raising taxes on the ‘rich’

During its time in office, the Trudeau government has raised taxes multiple times, purportedly to make sure high-income Canadians pay their “fair share” of taxes. But according to new polling data, federal tax policy (and rhetoric) appears to be at odds with the wishes of many Canadians.

In 2016, the government raised the top federal income tax rate from 29 per cent to 33 per cent, and in 2022 introduced a luxury tax on automobiles (priced at more than $100,000) and other vehicles. Most recently it raised the minimum income tax rate that higher-income Canadians must pay annually. In each case, the main goal is to raise additional revenue for Ottawa and ensure all Canadians pay their “fair share” of taxes.

But there are problems with this approach. Empirical research demonstrates that high tax rates reduce incentives for productive economic activity, including innovation, and undermine economic growth. Raising taxes on high-income earners also makes it more difficult for Canada to attract and retain professionals and high-skilled workers who are more likely to move to jurisdictions with lower taxes.

The Trudeau government has also failed to define the term “fair share,” allowing for subjective interpretations and fuelling misperceptions about the amount of taxes paid by people of different incomes. This likely explains in part why a new poll (conducted by Leger and published by the Fraser Institute) found a majority of Canadians (70 per cent) believe some Canadians don’t pay their fair share of taxes.

At first glance, this polling result suggests that most Canadians agree with the government’s rhetoric that more and/or higher taxes are needed to make the “rich” pay their fair share. But when asked if they support a tax increase on the top 20 per cent of income-earning families, only a minority (35 per cent) of Canadians said yes. In fact, more respondents (42 per cent) believe higher-income families should either pay less in taxes or the same amount they currently pay.

Considering the facts about taxes in Canada, these attitudes should not be surprising. According to a study published last year by the Fraser Institute, the top 20 per cent of income-earning households paid 61.4 per cent of the country’s personal income taxes in 2022 while accounting for 44.6 per cent of the country’s income. This is the only income group that pays a higher share of taxes relative to its share of income.

Finally, as shown by the new poll, a majority of Canadians (58 per cent) believe that the top combined (federal and provincial) personal income tax rate shouldn’t exceed 50 per cent. This is especially interesting since top combined income tax rates currently exceed 50 per cent in every province (except Alberta and Saskatchewan).

Contrary to any rhetoric, polling results show that more Canadians oppose tax increases for higher-income families than support them. Moreover, ill-defined terms such as “fair share” can mislead Canadians about how much tax higher-income families actually pay.

Instead of tax increases and divisive rhetoric, the Trudeau government should enact tax reforms that will encourage work and entrepreneurship, enhance economic growth, and make Canada a more attractive place for skilled workers and investment. All Canadians should be allowed to keep more of their hard-earned money.

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