Canadians get the worst of both worlds – high taxes and poor public services. Perhaps it’s time for a change. Photo credit: Getty Images via Bloomberg
Get out the torches and pitchforks Canadians. A number of recent polls and studies have found that a strong majority of Canadians believe they are overtaxed and not getting value for money from government. They are right, and it’s about time.
An Ipsos poll done for the Montreal Economic Institute was released last week and showed that 72 per cent of Canadians believe that the tax burden on individuals is too high, with only 21 per cent saying that the tax burden was acceptable. With respect to corporate taxes, 42 per cent of Canadians thought the tax load on businesses was too low and 26 per cent too high. 71 per cent agreed that increasing taxes on companies would just end up increasing prices for consumers. These results are encouraging as, although many Canadians still think taxing businesses more will not affect them, a majority realize the truth that companies will pass tax increases on to consumers to the extent they can.
Other parts of the survey were discouraging, as the results showed 80 per cent of Canadians believe the rich should pay more tax, with 40 per cent defining “rich” as anyone earning over $250,000 annually. Further, 44 per cent thought the combined federal/provincial tax rates should be over 50 per cent, while almost the same proportion – 42 per cent – disagreed. I doubt most survey respondents were aware that fully eight provinces already have combined income tax rates of over 50 per cent, and the rest are very close. Even though a strong majority wanted to see the rich pay more taxes, 77 per cent also agreed that the rich would be tempted to leave Canada if their taxes were increased too much, so at least that part of the downside of high taxes seems to be resonating.
Overall, 41 per cent thought that increasing taxes on the rich would be positive, 26 per cent said it would have no impact and 15 per cent said it would be negative. Regional breakdowns showed that people in the Atlantic region were more likely to think there would be a negative impact (24 per cent) versus the West and Ontario at 15 per cent and Quebec at 11 per cent. As the Atlantic provinces have some of the highest income and sales taxes in Canada, and suffer from population declines due to their citizens leaving for other parts of Canada or elsewhere, they may be especially qualified as to the impacts of too-high taxes.
Many Canadians clearly need to become more familiar with the experience of imposing very high taxes on the rich in other jurisdictions, where this approach has always failed to raise the revenue that was expected and tends to drive high income talent away. As a result, countries have ended up abandoning this policy as it always fails in practice, despite its continuing appeal in theory.
Another study published last week also highlighted high taxes, this time in Ontario. The Fraser Institute report noted how “temporary” income tax increases imposed in 2012 by the Liberal government of Dalton McGuinty on high income earners remain in place despite promises to reduce them by 2018. The combined top personal income tax level in the province is now 53.53 per cent, to which is added sales taxes, excise taxes, carbon taxes and other taxes that must be paid. This top tax rate applies to doctors, engineers, technology experts, entrepreneurs and other skilled professionals that governments claim to want to attract and retain. Yet these rapacious tax levels are a clear disincentive for high wage earners to remain in the province.
To make matters worse, the top two income tax brackets in Ontario are not indexed to inflation, so people end up getting bumped into a higher tax bracket simply because of inflation, an impact which becomes more problematic when inflation is high as it is currently. Overall, Ontario now has the fourth-highest total income tax rate in Canada or the US, putting the province at a significant disadvantage when competing for top level professionals.
Even though Canadians are already fed up with being overtaxed, they will be hit yet again in a few weeks as the April Fool’s federal tax hikes click in – higher carbon taxes and higher liquor taxes. At the same time, federal Members of Parliament will give themselves a cushy raise while many public sector unions are demanding outrageous salary increases when they already enjoy higher pay levels on average and many more benefits than their private sector counterparts who pay the bills. Later in 2023, Canadians will be punished with a second carbon tax, called the Clean Fuel Standard. Canadians have every right to be incensed.
Relative to other jurisdictions, Canadians are correct that they are very highly taxed. Research has shown that even if a country has high taxes, if their public services are top notch their citizens will be more willing to pay the taxes. Of course, recent terrible government failures in areas such as health care, obtaining basic services like a passport, a chaotic immigration situation, election interference by China, among other government missteps, have confirmed the view of Canadians that they are paying a great deal for poor quality service. Mismanagement of events such as the pandemic and the trucker convoy last year has served to bolster this perception.
Canadians are generally very tolerant people, and have put up with paying a great deal for poor government performance longer than many other countries would. Maybe it is time for a Canadian-style tax revolt – not torches and pitchforks but persistent opposition strenuously demonstrated at the ballot box.
She has published numerous articles in journals, magazines & other media on issues such as free trade, finance, entrepreneurship & women business owners. Ms. Swift is a past President of the Empire Club of Canada, a former Director of the CD Howe Institute, the Canadian Youth Business Foundation, SOS Children’s Villages, past President of the International Small Business Congress and current Director of the Fraser Institute. She was cited in 2003 & 2012 as one of the most powerful women in Canada by the Women’s Executive Network & is a recipient of the Queen’s Silver & Gold Jubilee medals.