Canada has a tax system that most would find offensive, says CCPA
Ottawa (11 Nov. 2007) - Tax cuts at all levels have made the Canadian tax system so regressive that the wealthy now pay the lowest percentage rates of all income groups, says a new report from the Canadian Centre for Policy Alternatives (CCPA).
The principle of progressivity has been savaged by successive waves of tax cuts approved by governments in recent years and the biggest beneficiaries have been the top 1% of Canadian families.
Those with incomes of $266,000 a year and more paid 30.5% of their income in federal, provincial and municipal taxes in 2005 while the poorest, with incomes of $13,523 or less, paid 30.7%. The bottom group represents the lowest 10% of Canadians in family earnings.
In 1990, the top 1% of Canadians paid 34.2% and the bottom 10% paid 25.5%.
Another glaring inequity shows up when looking at the groups paying the highest percentage taxes – families with earnings between $120,000 and $151,000 a year. This group pays 36.9% of their total income in taxes. Those earning $57,560 to $72,299 pay almost as much – 36.5%.
CCPA senior economist Marc Lee says the manner in which recent tax cuts have been made has created an "overall tax system now that most people would find offensive."
"The idea that someone who is in the upper middle class is paying a higher tax rate than someone much wealthier is not fair," Lee says.
The CCPA study covers the period from 1990 to 2005. It differs from other analyses in that it includes all sources of income – salaries, inheritances, employer-provided benefits and capital gains. It also covers all taxes, including property and corporate taxes and user fees charged by governments.
Lee said the 1990 to 2005 timeline was chosen because the last time a study based on similar methodology took place was in 1988. The period included a range of government activities, including tax hikes in the early 1990s to cope with deficits, and then successive tax cuts in more recent years.
His main finding is that on average, tax rates dropped by 2% between 1990 and 2005 as both federal and provincial governments brought in tax cuts that were both deeper and broader than earlier tax increases.
However, the relief was not spread equally. Those in the top 1% of earners actually saw their tax bill drop by about 4% whereas those at the very bottom endure an overall tax increase of 5%.
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring that our common wealth is used for the common good. NUPGE