WHO PAYS INCOME TAX?

SEPTEMBER 2017

MARK MILKE, PH.D. For the Canadian Taxpayers Federation - 1 - The Canadian Taxpayers Federation (CTF) is a federally ABOUT THE incorporated, not-for-profit citizen’s group dedicated to lower taxes, less waste and accountable government. The CTF was CANADIAN founded in Saskatchewan in 1990 when the Association of Saskatchewan Taxpayers and the Resolution One Association TAXPAYERS of Alberta joined forces to create a national organization. FEDERATION Today, the CTF has 117,000 supporters nation-wide. The CTF maintains a federal office in Ottawa and regional offic- es in British Columbia, Alberta, Prairie (SK and MB), Ontario, Quebec and Atlantic. Regional offices conduct research and advocacy activities specific to their provinces in addition to acting as regional organizers of Canada-wide initiatives.

CTF offices field hundreds of media interviews each month, hold press conferences and issue regular news releases, commentaries, online postings and publications to advocate on behalf of CTF supporters. CTF representatives speak at functions, make presentations to government, meet with poli- ticians, and organize petition drives, events and campaigns to mobilize citizens to affect public policy change. Each week CTF offices send out Let’s Talk Taxes commentaries to more than 800 media outlets and personalities across Canada.

Any Canadian taxpayer committed to the CTF’s mission is welcome to join at no cost and receive issue and Action Up- dates. Financial supporters can additionally receive the CTF’s flagship publication The Taxpayer magazine published four times a year.

The CTF is independent of any institutional or partisan affilia- tions. All CTF staff, board and representatives are prohibited from holding a membership in any political party. In 2015-16 the CTF raised $4.7-million on the strength of 29,102 dona- tions. Donations to the CTF are not deductible as a charitable contribution. ABOUT MARK MILKE

Mark Milke, Ph.D. is the author of four books and dozens of think tank reports published in Canada, the United States and Europe. Mark’s policy work has touched on everything from taxes, civil rights, and private property to airline competition, insurance, aboriginal policy, government monopolies and the folly of crony capitalism. His first book was described by a Vancouver Sun editor as “written with style and wit, a must for the thoughtful, and a stimulus for the forgetful.” Toronto Star columnist Carol Goar describes Mark as a “skilled researcher who uncovers information governments would prefer to keep hidden.”

An independent policy analyst, Mark has been interviewed by the New York Times and Wall Street Journal and all major Canadian media. Mark is the president of the Sir Winston Churchill Society of Calgary and past chairman of the editorial board of the online maga- zine C2C Journal.

Mark’s doctorate is from the University of Calgary. Mark lives in Calgary and beyond his data-driven work and historical accounts Mark is an active hiker, skier and runner with an interest in architecture, photography, cities, and history.

Mark Milke — Who Pays Income Tax?

SUMMARY*

Taxes in Canada were lower in the 1970s as a percentage As one would expect in a tax system where basic personal ex- of GDP emptions and multiple tax brackets shield lower income earn- ers from paying income tax, Canada’s tax burden is thus borne In the most recent year for which data is available, all taxes by middle-income and high-income earners. They pay the vast and non-tax receipts amounted to 38.6% of GDP. Thus, the majority of all income taxes. Any notion that middle-class and overall tax burden for Canadians was higher than even in the wealthier Canadians do not pay their “fair share” is incorrect. 1970s when the tax-to-GDP ratio ranged from 35.2% to 38.1% They pay most of the income tax. of GDP, a decade when Pierre Trudeau was (mostly) in power and known for his higher taxing preferences. Want lower taxes on the poor and middle class? Attract the rich One-third of tax filers pay no income tax A surprise is in store for those provinces that are relentless in In the latest year for which CRA data is available, 27.5 million their pursuit of higher taxes—Atlantic Canada and Quebec in people filed a tax return. Of that, over 9.1 million people or particular: The poorer provinces rely heavily on taxing the poor one-third of all filers paid no federal income tax that year. Thus for provincial income tax revenue. That’s because, relative to 18.4 million tax filers paid all federal and provincial income tax. other provinces, they have fewer wealthy taxpayers to share the burden. In Quebec, where the province collects its own provincial income tax, of almost 6.5 million filers in (the latest year for For example, in 2014 in Atlantic Canada, those who earned which Quebec data is available) 2.4 million tax filers, or 37%, less than $50,000 faced a relatively high share of the total paid no provincial income tax. provincial income tax burden: Newfoundland and Labrador (17.2%); Prince Edward Island (30.3%); Nova Scotia (21.1%); Who pays most of the income tax? Not those under New Brunswick (23.8%). Similarly high was Manitoba, where $50,000 the figure was 21.6%.

Of those Canadians who do file a return (taxable and non-tax- In contrast, the provincial tax burden portion was substantial- able) almost 87% of the federal income tax is paid by those ly less for those with incomes of $50,000 or less in: British who earn $50,000 or more; almost 88% of provincial income Columbia (where 12.1% of all provincial income tax was paid tax is paid by those who earn $50,000 or more. by this cohort), Alberta (7.6%), Saskatchewan (11.4%) and Ontario (11.6%). As for wealthier Canadians, defined here as those with in- comes over $100,000, such tax filers accounted for 8.4% of all tax forms filed, 33.2% of all taxable income, and 51.8% of all federal income tax paid and 54.5% of all provincial income tax paid.

*Note that data in this study is based on the latest tax data available at the time of writing: Finance Canada data on general revenues as a percentage of GDP (2015 data); CRA tax data by income cohort (2014), and Quebec tax data (2013). Note that due to rounding of percentages, not all totalled percentages will add exactly to 100%.

- 1 - INTRODUCTION AND PURPOSE OF THIS REVIEW

In recent years some have claimed Canadians are undertaxed. The tax burden in 2015 was thus higher than every year in From the Occupy Wall Street movement to selected academ- the 1970s when the range was between 35.2% and 38.1% of ics, politicians and others, some argue that taxes should be GDP. raised, either on specific cohorts (i.e., the “rich”) or on ev- eryone. In some instances, such tax increases have already Since the 1970s, with the exception of 1980, the overall tax occurred at the provincial level including in: British Columbia, burden for Canadians has been higher in every year and in Alberta, Manitoba, Ontario and in the Maritimes. Depending every decade relative to the lower-taxed 1970s. on the province, governments have increased income, sales or business taxes or all of the foregoing. It is critical to place some caveats around such comparisons. The taxes-GDP calculation is affected not only by whether the This report will focus on one aspect of taxation in Canada: federal, provincial or municipal governments raise taxes but taxes on personal income.1 It will do so with the sole purpose the strength of the Canadian economy. A “booming” econo- of illustrating the reality of such taxation and how the exist- my will shrink the measurement of taxes (and fees) relative ing burden is apportioned. In specific and for much of the to GDP and governments may have even raised taxes during analysis, it will illustrate how much tax is paid and by whom. such periods but which is not obvious given a growing econo- Taxpayers are divided into five cohorts to clearly illustrate the my. Likewise, an economy in recession will make it look as if income tax burden. governments have suddenly raised taxes.

The five groups of taxpayers are sorted by taxable income: Un- In any event, the figures do illustrate this point: For those who der $50,000; $50,000 to $99,999; $100,000 to $149,999; assert governments “must” raise taxes they unwittingly or $150,000 to $249,999; and above $250,000. The data for intentionally assert that at 38.6% of GDP (as of 2015), Canadi- this review is drawn mostly from the Canadian Revenue Agen- an governments cannot make do with the municipal, provincial cy’s annual compilation of tax data. Also, as Quebec collects and federal tax levels that are yet higher than during much of its own provincial income tax directly, the CRA data for the the 1970s —back when, at the federal level, a highly interven- nine provinces was supplemented by parallel Quebec data for tionist prime minister with a preference for higher taxes was in that province’s taxpayers. power.

Context: Canada’s overall tax burden higher now than in the 1970s under Pierre Trudeau

First, some overall context: When all levels of government (federal, provincial, municipal and other) are considered, and all taxes and non-tax receipts (i.e., employment insurance con- tributions, fees and other) are accounted for, the tax burden for Canadians in 2015 stood at 38.6% of GDP (Figure 1).

1. Readers should note that the most recent data available to the author at the time of writing was Finance department data for taxes as a percentage of the economy dates from 2015; the most recent CRA income tax data is for the filing year 2014 while the most recent year for similar Quebec data is 2013.

- 2 - Mark Milke — Who Pays Income Tax?

Figure 1: Canada: General Government Total Tax and Non-Tax Receipts (% of GDP)

43.6 45 42.7 40.6 39 40 40 38.1 37.3 38.6 36 35.2 35

30

25

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Source: Fiscal Reference Tables 2014 and 2016, Table 51

Who pays income tax? Recent data

With that context, consider the tax facts courtesy of the most Figure 2: Tax Returns Filed, 2014* recent data available. In 2014, over 27.5 million people filed a tax return. Of that, over 9.1 million people paid no income tax 30M at all. That means 18.4 million tax filers paid all the federal 27,534,730 and provincial income tax that year (Figure 2) while one-third 2 of filers paid zero. In Quebec, where the province collects its 25M own provincial income tax, of almost 6.5 million filers in 2013, 2.4 million tax filers or 37%, paid no provincial income tax. 20M 18,420,940

15M

10M 9,113,790

5M *Includes federal and provincial income tax; note this chart excludes Quebec provincial income tax numbers but would reflect federal income taxes paid in that province. 0 Total Taxable Non-taxable Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax Returns Returns Returns year), Table 2 All returns by Total Income Class.

2. Note that the CRA data includes federal income tax filings from Quebec residents and thus the 17.7 million and the 6.4 million Quebec filers cannot be combined with federal filers as that would, in most cases, double-count the number of tax filers. Unlike other provinces, Quebec residents file two tax returns, one federal and one provincial. In other provinces, taxpayers file one albeit with the provincial taxes calculated separately. However, that federal/provincial tax return for the nine provinces has a standard definition of taxable income.

- 3 - Earn less than $50,000? You’re not paying much for government

Figure 3a: Proportion of filers, Income and Federal Income Tax Paid by Cohort (All returns, 2014)

100%

80% 68.4%

60%

34.9% 35% 40% 31.9%

23.3% 21.1% 17.9% 20% 13.2% 13.7% 12.7% 8.2% 11.3% 5.4% 2.1% 1% 0% $0 to $50,000 to $99,999 $100,000 to $149,999 $150,000 to $249,999 $250,000+ $49,999 Proportion of tax filers (all returns) Share of total income Share of (federal) income tax paid

Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Table 2 All returns by Total Income Class.

Six-figure incomes pay over half of all federal income tax

As Figure 3b demonstrates, in 2014, when all cohorts over Figure 3b: $100,000+ Incomes: Share of $100,000 are combined, it turns out those tax filers account- Tax Filings, Income, and Federal Income ed for 8.4% of all tax forms filed, 33.2% of all income, and Taxes Paid (All returns, 2014) 51.8% of all federal income tax paid.

60% 51.8%

40% 33.2%

20% 8.4% 0%

$100,000+ in income

Proportion of tax filers (all returns) Source: Canada Revenue Share of income Agency, Final Statistics 2016 (2014 tax year), Table 2 All Share of all federal income taxes returns by Total Income Class.

- 4 - Mark Milke — Who Pays Income Tax?

Federal income tax: Which millions of taxpayers pay how many billions?

Figure 3c: Who Pays Federal Income Taxes? Millions Paying and Billions Paid (Taxable returns, 2014)

12 $46.7 50 45 10 9.752 40 35 8 6.365 $28.1 30 6 $23.9 25

$17.6 $16.9 20 4 15

2 1.471 10 0.566 0.268 5 0 0 $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Taxable Returns Federal Income Taxes Paid (in billions)

Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Table 2 All returns by Total Income Class.

Of those who paid federal income tax in 2014, about 9.8 million people (those with taxable income less than $50,000) Figure 3d: Average Federal Income paid $17.6 billion in federal income tax. Roughly 6.4 million Tax Bill, in $ (Taxable returns, 2014) people (those with incomes between $50,000 and $99,999) paid $46.7 billion in federal income tax. 120,000 $105,082 100,000 Those who earned between $100,000 and $149,999 (1.5 million tax filers) paid $23.9 billion in federal income tax; 80,000 566,000 Canadians who earned between $150,000 and $249,999 paid $16.9 billion. Lastly, 268,000 tax filers whose 60,000 incomes were above $250,000 paid $28.1 billion in federal 40,000 $29,833 income tax. 20,000 $16,242 $7,330 $1,800 0 $0 $50,000 $100,000 $150,000 $250,000+ to to to to $49,999 $99,999 $149,999 $249,999

Average federal income tax bill in $, by cohort

Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Table 2 All returns by Total Income Class. **Calculations of averages based on taxable returns only.

- 5 - One would expect such ratios in a system where a basic per- from $1,800 for those under $50,000 in income to $105,082 sonal exemption from personal income tax exists (and which for those earning $250,000 or more. While averages, they also helps3 exclude almost nine million tax filers from any illustrate which cohort pays federal income tax and to what income tax). degree vis-à-vis others.

Thus, broken down by an average and by cohort, Figure 3d il- lustrates the average federal income tax bill in each cohort for those who were paying income tax.4 The average bill ranges

In the provinces: Earn over $50,000 and pay nearly 88% of provincial income tax

Figure 4a: Proportion of filers, Income and Provincial Income Tax Paid* (All returns, 2014)

80% 68.4%

60%

40% 31.9% 34.9% 33.1% 23.3% 22.8% 18.4% 20% 12.3% 13.7% 13.3% 8.2% 11.3% 5.4% 2.1% 1.0% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

*Calculations exclude Quebec figures as Quebec collects its own provincial income tax. Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Table 2 All returns by Total Income Class. **Calculations of averages based on taxable returns only.

3 The word “helps” exclude is important to understand. The Basic Personal Exemption is only one reason some may not pay any income tax in a given year. For example, the federal BPE in 2014 was $11,138. If a tax filer had not used RRSP room for years and in 2014 earned $50,000 but claimed an RRSP deduction of $40,000, that filer would not pay any income tax. The combination of the BPE and RRSP deduc- tion would lead to that tax filer being included in the non-taxable returns category. 4 Note that in figures 3c and 3d, the calculations are made using taxable returns only. The reason for this is straightforward: Non-taxable returns do not, obviously, pay income tax. Thus a calculation on the average tax bill by cohort should not include those who do not pay tax.

- 6 - Mark Milke — Who Pays Income Tax?

The proportion of provincial income tax paid by those with Figure 4b: $100,000+ Incomes earnings over $50,000 mostly mimics the federal figures: Share of Tax Filings, Income, and Provincial 87.7% of provincial personal income tax is paid by those income Taxes Paid (All returns, 2014) whose incomes are over $50,000.

In 2014, those whose income was less than $50,000 (68.4% 60% 54.5% of all tax filers) paid just 12.3% of all provincial income taxes. 50% On the opposite side of the income spectrum, those with earnings above $250,000 accounted for 1.0% of all tax filers, 40% 33.2% 11.3% of all income and 22.8% of all provincial income taxes 30% paid (Figure 4a).

20% Also, as Figure 4b demonstrates, in combining all cohorts over

10% 8.4% $100,000, such tax filers account for 8.4% of all filers, 33.2% of all income, and 54.5% of all provincial income tax paid in 0% 2014. $100,000+ in Income

Proportion of tax filers (all returns)

Share of income *Calculations exclude Quebec figures as Quebec collects its own provincial income tax. Share of provincial income taxes Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Table 2 All returns by Total Income Class.

- 7 - Provincial income tax: Which millions pay which how many billions?

Figure 4c: Who Pays Provincial Income Taxes?* Millions Paying and Billions Paid (Nine-provinces, taxable returns only, 2014)

12 25

9.752 10 $19.6 20

8 6.365 $13.5 15

6 $10.9 10 $7.9 4 $7.3

5 2 1.471 0.566 0.268 0 0 $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Taxable Returns Only (in Millions) Income Taxes Paid (in billions)

*Calculations exclude Quebec figures as Quebec collects its own provincial income tax. Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Table 2 All returns by Total Income Class.

Figure 4d: Average Provincial Income Tax Bill* (Nine-provinces, taxable returns only, 2014)**

60,000 $50,304 50,000

40,000

30,000

20,000 $13,908

10,000 $7,385 $3,075 $745 0 $0 $50,000 $100,000 $150,000 $250,000+ to to to to *Calculations exclude Quebec figures as Quebec collects its own provincial $49,999 $99,999 $149,999 $249,999 income tax. Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Average Provincial Income Tax Paid, in $** Table 2 All returns by Total Income Class. **Calculations of averages based on taxable returns only.

- 8 - Mark Milke — Who Pays Income Tax?

With a look at provincial income tax payments in 2014, those Federally, 33% of tax filers pay no federal income tax; in Que- with income less than $50,000 (Quebec is excluded and is bec, for provincial filers for provincial income tax, that figure is profiled separately), 9.8 million people paid $7.3 billion in 37%. provincial income tax. Another 6.4 million people, those with incomes between $50,000 and $99,999, paid $19.6 billion. Quebec, with some of the most steeply “progressive” income tax rates in the country may very well have encouraged high-in- For those who earned between $100,000 and $149,999, 1.5 come earners from settling in that province. The result is million tax filers delivered $10.9 billion to provincial treasuries that the rest of the population shoulders more of the income through their income tax payments; 566,000 Canadians who tax burden, usually middle and (the remaining) high-income earned between $150,000 and $249,999 paid nearly $7.9 taxpayers. billion. Lastly, 268,000 tax filers whose incomes were above $250,000 paid $13.5 billion in provincial income tax. Under $50,000

• In other provinces, those under $50,000 (68.4% of all One would expect such ratios in a system where a basic per- filers) pay 12.3% of provincial income taxes (Figure 4a). sonal exemption from tax exists. The exact proportion though will vary by province, as the reader will see in further data in • In Quebec, those earning under $50,000 (73.2% of figures 7a to 7j. taxable filers) pay just 3.1% of the provincial income tax burden (Figure 6a). Thus, broken down as an average and by cohort: the average provincial income tax bill in each cohort, ranged from $745 for Between $50,000 and $99,999 those with incomes under $50,000, and $50,304 for those earning $250,000 and above. Again, these are averages: they • In other provinces, those between $50,000 and $99,999 Taxable Returns Only (in Millions) Income Taxes Paid (in billions) illustrate which cohorts pay provincial income tax and in what (23.3% of all filers) pay 33.1% of provincial income taxes amounts.5 (Figure 4a).

Quebec: Steeply “progressive” • In Quebec, those between $50,000 and $99,999 rep- resent a smaller portion of tax filers (21.2% of all filers) but pay a higher share, 48.5%, of provincial income taxes Figure 5: Quebec Tax Returns Filed, 2013 (Figure 6a). $100,000+

7,000,000 6,470,971 • In other provinces, those with six-figure incomes, i.e., $100,000+ (8.4% of all filers) pay 54.5% of provincial 6,000,000 income taxes (Figure 4b).

5,000,000 4,070,829 • In Quebec, those with six-figure incomes represent a 4,000,000 smaller portion of tax filers (5.6% of all filers) and pay 48.4%, of provincial income taxes (Figure 6b). 3,000,000 2,400,142

2,000,000 Expressed differently, if the provincial tax burden in Quebec is to be lessened on the middle class (defined here as between 1,000,000 $50,000 and $99,999 in income) and without a rise in other taxes on other cohorts, low or high, Quebec needs many more 0 Total Returns Taxable Non-taxable higher income earners. Returns Returns Source: Statisques Fiscale Des Particuliers, Annee D’ Imposition 2013

5 Note that in figures 4c and dd, the calculations are made using taxable returns only. The reason for this is straightforward: Non-taxable returns do not, obviously, pay income tax. Thus a calculation on the average tax bill by cohort should not include those who do not pay tax.

- 9 - Figure 6a: Proportion of filers, Income and Quebec Provincial Income Tax Paid (All returns, 2013)

80% 73.2%

60% 48.5% 40.1% 40% 35.2%

21.2% 20% 18.8% 18.0% 11.6% 10.5% 8.4% 3.6% 5.8% 3.1% 1.3% 0.7% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of Quebec provincial income taxes paid

Source: Statisques Fiscale Des Particuliers, Annee D’ Imposition 2013

Figure 6b: $100,000+ Incomes in Quebec Share of Tax Filings, Income, and Provincial Income Taxes Paid (All returns, 2013)

60%

50% 48.4%

40%

30% 24.7%

20%

10% 5.6%

0% $100,000+ in Income

Proportion of Quebec tax filers (all returns)

Share of income

Share of Quebec provincial income taxes paid

Source: Statisques Fiscale Des Particuliers, Annee D’ Imposition 2013

- 10 - Mark Milke — Who Pays Income Tax?

Figure 6c: Who Pays Quebec’s Provincial Income Taxes? Millions Paying and Billions Paid

2.5 2.35 12

2 $9.6 10

8 1.5 1.36 6 1 $3.7 $3.6 4 0.5 $2.3 0.23 2 Proportion of tax filers (all returns) Share of income Share of Quebec provincial income taxes paid $0.6 0.08 0.04 0 0 $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Taxable returns (in millions) Quebec provincial income taxes paid (in billions)

Source: Statisques Fiscale Des Particuliers, Annee D’ Imposition 2013

In poorer provinces, the poor and middle class shoulder a Figure 6d: Average Quebec Provincial larger proportion of the income tax burden Income Tax Bill* (Taxable returns, 2013) Here, the ten provinces are each detailed by the five cohorts earlier noted for federal income tax: Those whose income is: under $50,000; $50,000 to $99,999; $100,000 to 100,000 $81,558 $149,999; $150,000 to $249,999; $250,000 and over. 80,000 Each province will not be commented on in detail. Instead, 60,000 some observations from the data (Figures 7a to 7j): 40,000 $27,808 • Some less prosperous provinces6 rely heavily on taxing 20,000 $15,858 the poor for provincial income tax revenue. For exam- $7,021 $260 ple, in 2014 in Atlantic Canada, those earning less than 0 $50,000 paid a large proportion of the total provincial $0 $50,000 $100,000 $150,000 $250,000+ to to to to income tax burden: Newfoundland and Labrador (17.2%); $49,999 $99,999 $149,999 $249,999 Prince Edward Island (30.3%); Nova Scotia (21.1%); New Average Quebec provincial income tax bill ($)* Brunswick (23.8%). Similar to Atlantic Canada was Mani- Source: Statisques Fiscale Des Particuliers, Annee D’ Imposition 2013 toba with a figure of 21.6%. *Calculations of averages based on taxable returns only.

6 I define “less prosperous” using income per capita data. See Statistics Canada, CANSIM Table 384-0039.

- 11 - • In contrast, the share of the provincial tax burden for all provincial income tax paid: Newfoundland and Labra- those under $50,000 in income was substantially less in dor (37.4%); Prince Edward Island (42.6%); Nova Scotia British Columbia (12.1%), Alberta (7.6%), Saskatchewan (43.3%); New Brunswick (43.5%). In Manitoba, the figure (11.4%) and Ontario 11.6%). was 40.9% and in Quebec the figure was 48.5%. Thus in Quebec, the province derives nearly half its income tax • For those who earn less than $50,000, Quebec is the revenue from those one might term “middle class.” anomaly here at 3.1% of the total provincial tax bur- den but that is because the “middle class” in Quebec In contrast, in 2014, the share of the provincial income tax ($50,000 to $99,999) make up a larger share of the tax burden for those with incomes of between $50,000 and burden in that province in comparison. Quebec’s wealthy $99,999 was substantially smaller in Saskatchewan (39.6%), are also relatively few in number. British Columbia (32.6%), Ontario (31.6%) and Alberta (30.6%). • Some provinces also rely heavily on taxing middle-income earners for provincial income tax revenue relative to richer provinces. For example, in 2014 those earning between $50,000 and $99,999 faced the following proportion of

Figure 7a: Who pays provincial income taxes in Newfoundland and Labrador? (By income cohort, 2014

80% 70.8%

60%

35.5% 37.4% 40% 33.1%

20.7% 21.3% 20% 17.2% 15.5% 13.4% 10.7% 5.6% 9.0% 7.0% 2.2% 0.7% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

Source: Statisques Fiscale Des Particuliers, Annee D’ Imposition 2013

- 12 - Mark Milke — Who Pays Income Tax?

Figure 7b: Who pays provincial income taxes in Prince Edward Island? (By income cohort, 2014)

80% 74.9%

60% 45.7% 42.6% 40% 36.4% 30.3% 20.8% 20% 13.2% 9.2% 4.7% 7.1% 6.8% 3.0% 1.0% 0.4% 4.1% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

Figure 7c: Who pays provincial income taxes in Nova Scotia? (By income cohort, 2014)

80% 72.2%

60% 43.3% 40% 39.4% 37.2%

21.1% 22.0% 20% 15.9% 11.5% 9.2% 10.4% 6.1% 4.0% 5.8% 1.4% 0.5% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

- 13 -

Figure 7d: Who pays provincial income taxes in New Brunswick? (By income cohort, 2014)

80% 75.0%

60%

44.0% 43.5% 40% 35.4%

23.8% 20.0% 20% 16.8% 10.9% 8.5% 7.4% 5.1% 4.5% 3.6% 1.1% 0.4% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

Figure 7e: Who pays provincial income taxes in Quebec? (By income cohort, 2014)

80% 73.2%

60% 48.5% 40.1% 40% 35.2%

21.2% 20% 18.8% 18.0% 10.5% 11.6% 5.8% 8.4% 3.1% 3.6% 1.3% 0.7% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

- 14 - Mark Milke — Who Pays Income Tax?

Figure 7f: Who pays provincial income taxes in Ontario? (By income cohort, 2014)

80% 67.6% 60%

40% 35.6% 30.4% 31.6% 26.5% 23.8% 20% 17.5% 11.6% 14.0% 12.9% 12.0% 8.1% 5.5% 2.0% 1.0% 8.4% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

Figure 7g: Who pays provincial income taxes in Manitoba (By income cohort, 2014)

80% 71.3%

60%

40.9% 37.3% 37.7% 40% 31.6% 21.6% 22.7% 20% 16.5% 11.8% 12.3% 8.8% 4.2% 5.8% 7.4% 1.3% 0.6% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

- 15 -

Figure 7h: Who pays provincial income taxes in Saskatchewan (By income cohort, 2014)

80% 64.3% 60%

39.6% 40% 37.2% 29.4% 25.8% 22.7% 20% 16.4% 11.4% 13.2% 13.1% 6.7% 8.6% 8.3% 2.3% 0.8% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

Figure 7i: Who pays provincial income taxes in Alberta (By income cohort, 2014)

80%

60% 57.3%

40% 30.7% 30.6% 27.0% 20.2% 21.3% 23.2% 20% 17.5% 17.3% 18.4% 13.2%13.2% 13.2% 7.6% 9.2% 8.6% 4.4% 2.1% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

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Figure 7j: Who pays provincial income taxes in British Columbia (By income cohort, 2014)

80% 68.7%

60%

35.6% 40% 32.5% 32.6%

23.1% 22.8% 20% 18.4% 12.1% 14.0% 14.1% 8.1% 9.8% 5.3% 2.0% 0.8% 0% $0 to $50,000 to $100,000 to $150,000 to $250,000+ $49,999 $99,999 $149,999 $249,999

Proportion of tax filers (all returns) Share of income Share of provincial income tax paid

Want a gentler tax burden on lower and middle-class incomes? Attract the rich.

Figure 8a: Six Figure Incomes ($100,000+) Who pays provincial income taxes? A Comparison

70% 61.8% 60% 56.8% 55.3%

49.2% 49.0% 48.4% 50% 45.4%

37.5% 40% 35.6% 34.0% 33.4% 31.4% 31.9% 32.7% 30% 25.1% 27.1% 23.4% 24.7% 20.6% 17.9% 20% 15.7% 9.9% 10% 8.6% 8.5% 8.1% 6.1% 5.8% 5.6% 5.0% 4.3%

0% AB SK ON NF BC MB NS QU NB PE

100,000+ as a proportion of tax filers (all returns) Share of income Share of provincial income tax paid

Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Table 2 All returns by Total Income Class.

7 Justin Gionavatti. 2015. ‘NDP tax hikes spell the end of traditional ‘Alberta Advantage’ Globe and Mail. accessed August 21, 2015.

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Figure 8b: $99,999 and Below Who Pays Provincial Income Taxes? A Comparison

100% 95.7% 93.9% 94.2% 94.4% 95.0% 90.1% 91.4% 91.5% 91.9% 90% 84.3% 82.1% 79.4% 80% 76.6% 75.3% 74.9% 72.9% 68.6% 68.1% 70% 66.6% 66.0% 67.3% 64.4% 62.5% 60% 54.6% 50.8% 51.0% 51.6% 50% 43.2% 44.7% 40% 38.2%

30%

20%

10%

0% AB SK ON NF BC MB NS QU NB PE

$99,999 and under + as a proportion of tax filers Share of income Share of provincial income taxes paid

Source: Canada Revenue Agency, Final Statistics 2016 (2014 tax year), Table 2 All returns by Total Income Class.

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Lastly, as a provincial comparison between provinces demon- SUMMARY AND strates, it is easier to levy lower taxes overall if a province has plenty of six-figure income earners (Figure 8b). CONCLUSION

• As a proportion of all tax filers, in 2014, Alberta had the For those who assert governments “must” raise taxes, they highest ratio of six-figure income earners in the country: unwittingly assert that at 38.6% of GDP (in 2014), Canadian 15.7%. Their share of all income was 49.2% while they governments cannot make do with the municipal, provincial paid 61.8% of all provincial income tax. Of all provinces, and federal tax levels that are yet higher than during the Alberta recorded the highest proportion of provincial 1970s—when, at the federal level, a highly interventionist income tax paid by six-figure tax filers. prime minister with a preference for higher taxes was in power.

• This fact alone demonstrates why Alberta Premier Ra- Moreover, in the most recent year for which detailed tax chel Notley was incorrect in 2015 when she asserted statistics are available, 2014, CRA data shows that over 27.5 that Alberta’s single tax was a “brief and unfortunate million people filed a tax return. Of those, 33% (over 9.1 million experiment”7 (and thus eliminated the single tax on that people) paid no federal income tax. The remaining 18.4 million justification). In fact, as the 2014 data demonstrates, the tax filers paid all income tax. In Quebec, where the province province’s ability to generate wealth and tax all income at collects its own provincial income tax, of almost 6.5 million a moderate, single rate allowed it to ensure that 84.3% of filers in 2013, 2.4 million tax filers, or 37%, paid no provincial all tax filers—those earning less than $100,000—paid just income tax. 38.2% of all provincial income taxes (Figure 8b). Of those Canadians who did pay income tax in 2014, those • In contrast, in higher-taxed provinces (all provinces who earned $50,000 or more paid almost 87% of the federal relative to Alberta in 2014), those who earned less than income tax and almost 88% of provincial income tax. $100,000 paid the greatest proportion of provincial income tax collections. For example, in Quebec, 94.4% of As for wealthier Canadians, those who earned over $100,000 tax filers (those below $100,000) paid 51.6% of all provin- in 2014 accounted for 8.4% of all filers and represented 33.2% cial income tax in 2014 (Figure 8b). of all income earned and paid 51.8% of all federal income tax and 54.5% of all provincial income tax. • In the most extreme examples, in Manitoba and the Mar- itimes—and despite or perhaps because of their high per- As one would expect in a tax system with basic personal sonal income tax rates on higher income earners which exemptions from income tax at lower income levels, the tax made such earners scarce on the ground— those left in burden is thus borne by middle-income and high-income earn- such provinces, and earning less than $100,000, paid the ers who pay the vast majority of all income tax. Any notion that vast bulk of provincial income taxes: Manitoba (62.5%), middle-income or high-income earners in Canada do not pay Nova Scotia (64.4%), New Brunswick (67.3%) and Prince their fair share is incorrect. Edward Island (72.9%) (Figure 8b).

- 19 - REFERENCES

1. Department of Finance (2014 and 2016) Fiscal Reference Tables, 51. http://www.fin.gc.ca/frt-trf/2014/frt-trf-14-eng.asp http://www.fin.gc.ca/frt-trf/2016/frt-trf-16-eng.asp

2. Canada Revenue Agency (2017). Final Statistics 2016 (2014 tax year), http://www.cra-arc.gc.ca/gncy/stts/t1fnl/2014/tbl2.csv Table 2, All returns by Total Income Class.

3. Quebec (2017). Statisques Fiscale Des Particuliers, Annee D’ Imposition 2013. http://www.finances.gouv.qc.ca/documents/statistiques/fr/STAFR_sfp_2013.pdf

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