Higher taxes hit middle-income earners in Atlantic Canada

Middle-income Atlantic Canadians face higher income tax rates and overall provincial tax bills than most others Canadians earning similar levels of income.

As shown in a recent study, residents of all four Atlantic provinces with market earnings at the national average income level face substantially higher tax rates on the next dollar they earn than people with identical incomes in Ontario and Western Canada.

Let’s look at the numbers. At the national average market income level (in 2022) of $52,750, Nova Scotians face a provincial tax rate of 14.95 per cent on the next dollar that they earn. Residents of New Brunswick and Newfoundland face a nearly identical tax rate (14.82 and 14.50 per cent, respectively) while the rate is slightly lower in Prince Edward Island (13.80 per cent). These rates are among the highest in the country, surpassed only by Quebec.

In fact, individuals with identical incomes face much lower tax rates in several other provinces. For example, the provincial income tax rate on the next dollar earned facing someone at the exact same income level is 10.00 per cent or lower in British Columbia, Ontario and Alberta.

One way to understand the impact of these different tax rates is to consider (after accounting for federal and provincial taxes) how much additional income a person at the national average income level must earn to increase their take-home pay by $100. In all four Atlantic provinces, a person must earn more than $152 to boost their after-tax income by $100. In B.C. by comparison, an individual must earn $139 to increase their take-home pay by the same amount.

Put differently, the tax rate facing middle-income Atlantic Canadians is almost identical to rates faced by the highest-income earners in some other provinces. In Saskatchewan and Alberta, CEOs earning $500,000 face a tax rate of 14.5 and 15 per cent respectively—nearly identical to the rate faced by the average national income earner in Atlantic Canada.

Finally, Atlantic Canadians earning the national average income faces a much higher overall provincial income tax burden than someone with a similar income elsewhere. For instance, the provincial income tax bill in Nova Scotia for someone earning the national average income is more than twice as large as for someone earning the exact same income in B.C. or Ontario.

Clearly, if governments in Atlantic Canada want to help their residents keep more of their money, they should reduce tax rates, which are among the highest in the country.