 |
|
|
| Are Canadians too highly taxed? By Louis Erlichman Canadian Research Director |
| Are Canadians too highly taxed? The proponents of big tax cuts (and the Alliance in particular) say we are. In fact, the most recent figures from the Organization for Co-operation and Economic Development (OECD) show us to be around the middle of the pack of industrial countries for taxes. In 1997, taxes in Canada were 36.8% of gross domestic product, exactly the average for the G-7 (which also includes the U.S., U.K., Japan, France, Germany and Italy), and below the average of 37.2% for all the 29 OECD countries. Looking beyond the overall tax burden, it is interesting to compare how we tax to other countries. The largest share (38%) of Canada’s taxes comes from personal taxes on income, profits and capital. Goods and services taxes (the federal GST and provincial sales taxes) account for 24%. Payroll taxes (CPP, EI, etc.) make up 16% of our tax burden, while Corporate taxes and Property taxes each account for 10% of the total. We collect a bigger share of our taxes through personal taxes than any of the other G-7 countries. On the other hand, we have the lowest payroll taxes. Our corporate taxes are around the middle, while our property taxes are among the highest. Our goods and services/sales taxes are relatively low, particularly compared to Europe, where value-added taxes are the leading source of government revenue in many countries. Canada’s reliance on personal taxes is not a bad thing. Income taxes – since rates increase somewhat with income, and are therefore related to ability to pay – are about the only progressive taxes we have. Sales taxes and payroll taxes are generally calculated on a fixed percentage basis, and may work to be slightly regressive (poor people actually paying a larger share of their income). Moves away from income taxes towards more payroll taxes and sales taxes are therefore not progressive. Similarly, the movement for a flat income tax (with a single tax rate at all income levels), espoused by the Alliance (and even the odd Liberal) is a move away from progressive taxation. And what about the Liberals? Are they moving to more progressive taxation? In Paul Martin’s recent mini-budget, 83% of the announced tax savings go to the top third of Canadians, income-wise. The middle third get only 13% of the total, while the bottom third get only 4% of total tax savings. While the bottom two-thirds of Canadians, income-wise (roughly, families earning $65,000 a year or less) have given up more than their share in government cutbacks to services and benefits like U.I., they are getting only about a sixth of the total tax break. It is important, in the midst of tax cuts and tax cut promises, to look at the facts, and who benefits most. |
|
|
|
|
|
