The rich need to pay their fair share.
That’s a refrain we often hear from the progressive side of the aisle, with politicians in both Canada and the United States arguing that more taxes need to be piled on top of the wealthy, implying that somehow they don’t contribute enough to our social safety net.
But in Canada, at least, the rich do pay their fair share, and then some.
The Fraser Institute recently did a study that shows that Canada’s top 20 per cent of income-earning families pay more than half (in fact, more than 58 per cent) of all taxes. That far dwarfs that quintile’s share of total income, too.
If one looks specifically at income taxes, the tax burden is even more lopsided. The top 20 per cent of income-earning families pay more than 65 per cent of Canada’s income tax bill.
Contrast that with the bottom 20 per cent of income-earning families, who pay just 0.7 per cent of income taxes and 1.7 per cent of total taxes in Canada despite having 4.3 per cent of the country’s total income.
It hardly seems fair that 20 per cent of society is tasked with paying 65 per cent of Canada’s total income tax bill. And yet that’s the reality in today’s Canada.
That’s a key reason why so many professionals are leaving. Doctors, professors, inventors, and entrepreneurs often leave Canada for greener pastures, tired of paying heavy tax bills when there are options to move elsewhere.
It’s essential that Canada’s competitiveness with other industrialized countries remain. Right now, Canada faces a “brain drain,” particularly to the United States. The last thing the country should be doing is considering raising taxes on the rich. They already pay their fair share, and the Fraser Institute’s study proves it.
One of the most calamitous things that the Trudeau government did was raise taxes on Canada’s top income earners. Back in 2020, the Trudeau Liberals created a new top income tax bracket, raising it from 29 per cent to 33 per cent for all income earned above $200,000. That only served to accelerate Canada’s brain drain problem.
Repeating that mistake would prove to be very costly. Canada can ill afford to lose more of our top income earners to the United States or elsewhere. Raising taxes on the wealthy often backfires, with anticipated revenue often far less than anticipated as many chose to relocate or carefully plan their behaviour to lessen their tax burden.
Consider the example of the United Kingdom. In 2010, the government there created a new top income tax bracket of 50 per cent, up from 40 per cent. The government projected that the tax hike would bring in 2.5 billion pounds a year, yet it ultimately generated less than one billion pounds. That’s because the tax base responded to the tax hike by adjusting its behaviour.
It’s even easier for the wealthy to do so in Canada’s case, with the United States right next door and our economies already so integrated.
Given how big Ottawa’s deficit is, no doubt it will be tempting for Finance Minister François-Philippe Champaigne and Prime Minister Mark Carney to turn to the Trudeau government’s old recipe of hiking taxes on the wealthy. But that would be a mistake. Higher income earners already pay their fair share, and then some.
Instead of pursuing policies that encourages brain drain, Ottawa should find ways to encourage everyone to want to work and earn more, by lowering taxes across the board and finding offsetting savings through cutting government spending and eliminating boutique tax credits.
Jay Goldberg is the Canadian Affairs Manager at the Consumer Choice Center. He previously served as the Ontario Director at the Canadian Taxpayers Federation and a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.
