It’s no secret that Canadians are very heavily taxed. We endure high income taxes, consumption taxes (GST/HST/PST), payroll taxes (EI, CPP, Workers’ Compensation), capital gains taxes, property taxes, “health” taxes in a number of provinces, customs duties, excise taxes, and others. Every year the Fraser Institute think tank publishes a “tax freedom” day, after which Canadians actually start working for themselves, not government. This date usually occurs about mid-June, indicating that most Canadians work for about half of the year just to send money to the various levels of government. This is outrageous.
Another element to consider is what Canadians receive for the massive amount of taxes they pay. Although there was a time that public services in Canada were of relatively high quality, those days are long gone. Bad government policies such as not holding government employees to account when performance is poor, permitting the abuse of such things as sick days and other time off and caving to public sector union demands has led to a serious deterioration in the quality of public services. The Trudeau government drastically increased the size of the federal government by 40 per cent in terms of employees, and costs by 70 per cent, while service quality continued to decline. Provincial and municipal governments have also relentlessly increased the size and cost of their governments, putting a heavier burden on businesses and citizens to pay for these increases.
International comparisons show how our tax regime affects Canada’s competitiveness, both for individuals and businesses. Canada comes in at about the middle of OECD countries but is considerably higher for capital gains and dividends. The most important comparison is to the U.S., where Canada has a higher total tax burden, notably for middle to higher earners and with consumption taxes. As well, the highest level of federal personal taxation in the U.S., currently at 37 per cent, only applies when income exceeds $640,600 whereas Canada’s top federal rate of 33 per cent starts applying at $258,400 of income. State/provincial income tax is added on top of that, and there are a number of U.S. states that have no income tax at all whereas all Canadian provinces levy personal income taxes. It’s estimated that about 40 per cent of Canadians pay no tax on a net basis after various rebates, deductions, and tax credits are factored in, as compared to about 30 per cent of Americans.
None of this is big news, as it has been the reality in Canada for some time. During pre-election periods, most governments promise to decrease taxes but in recent years have not delivered anything significant. Ontario Premier Doug Ford is a good example of a politician who campaigned on tax cuts yet did little to fulfill these promises. That’s why it was surprising to hear Ford recently comment that Ontarians are overtaxed. He is 100 per cent correct yet doesn’t seem to realize that he is one of the main culprits as to why this is happening.
This statement of Ford’s, that Toronto in particular was overtaxed, took place in response to the City of Toronto’s budget process being underway and the perennial search on the part of Toronto for “new revenue tools.” For 2026, Toronto Mayor Olivia Chow has put forward a property tax increase of 2.2 per cent, the lowest increase in her mayoral term to date. Of course, there is a municipal election scheduled in Ontario for this fall, which is undoubtedly why Chow is keeping the proposed tax hike to a relatively low number.
Ford’s comment on the city’s attempts to obtain more funds from the province was that the city doesn’t have an income problem, it has a spending problem. If only Ford would follow his own advice, as exactly the same thing can be said of the province which is spending much more and running larger deficits than it ever stated it would. Economic growth has been sluggish for the last few years, but the worst way any government can respond to that is to increase taxes or other fees on businesses and individuals, as that merely slows the economy even more. We also have a recession threatening in the coming year which, if it takes place, will only worsen governments’ financial situation.
In his comments, Ford also noted that some Ontarians were spending as much as 54 per cent of their income over certain thresholds on tax. This is absolutely true, and this is happening on Ford’s watch. Although the Ford government has reduced some taxes and fees, such as those for drivers’ license stickers and gasoline taxes, it has not touched income taxes. Indeed, the top two income brackets in Ontario, clocking in at $150,000 and $220,000, are not even indexed to inflation, which means that inflation alone will increase taxes on anyone earning in these amounts. Although these income levels are not inconsequential, they are certainly much lower than where the U.S. highest income taxes apply at more than $600,000.
Many Canadians believe that “tax the rich” is a sensible economy policy, largely because they don’t believe it will ever affect them. Canada already “taxes the rich” at a very high rate, and it still doesn’t solve any government’s financial issues or help the economy. In fact, research shows that when governments receive more tax revenues, they are much more likely to spend it than to use it to bring down deficits and debt. It’s also worth noting that in Ontario, there is a severe doctors’ shortage. Doctors and other professionals are taxed to the max in Ontario and other provinces. Do people really think this is not a major disincentive for doctors, engineers, entrepreneurs and other relatively high earners to locate in Ontario? Of course it is, and this is why the “tax the rich” philosophy is so self-defeating as we discourage individuals who make a major contribution to our economy and society.
It is refreshing to see any Canadian politician admit that we are overtaxed, although when they are a significant part of the problem it’s pretty hard to take them seriously. It is well known that Ontario and Canada have a productivity problem, too much government, high taxes and excessive heavy regulation. A reduction in income taxes both provincially and federally would be a welcome first step to helping Canada get out of the economic doldrums.
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.
