You may have seen reports of a recent Statistics Canada study of figures from 2002 federal personal income tax filings, which said that the top 10% of people filing returns paid over 52% of all personal income taxes (2002 figures). The news reports presented this a shocking fact, and in the background you could almost hear the right-wing “think-tanks” revving up their campaign of outrage and pity for the poor suffering rich.
Before you start feeling too sorry for poor little rich Canadians, it is worth noting that the top 10% of taxfilers got almost 36% of the total income reported. Higher income Canadians pay a lot of income tax because they get a lot of income.
If the personal income tax was absolutely neutral (a “flat tax”), you would expect the top 10% to pay around 36% of the total tax take. So the fact that they paid 52% is a sign that the personal income tax system is somewhat “progressive” (people with higher incomes pay a higher effective tax rate).
The study also indicated that the share of total taxes paid by the top 10% rose from 46.0% in 1990 to 52.6% in 2002. While this is partly a result of a more effectively progressive tax system, it has more to do with the fact that we become a much more unequal society through the 1990s. Between 1990 and 2002, the share of the top 10% went from 31.7% to 35.7%.
Another thing to remember is that, while personal income makes up the largest single source of federal government revenue, it still accounts for less than half of total revenues, and other federal taxes – particularly the Goods and Services Tax (GST) and Employment Insurance premiums - are neutral, or even regressive, with lower income people paying a larger proportion of their income than higher income people.
So the overall tax burden is considerably less progressive than it might appear on first glance. The real story (which didn’t make it into the news reports) is rising inequality - and you can spare the tears for upper income Canadians.
