Jack Mintz is dreaming about an efficient, low\u002Dtax government that lets Canadians put food on the table and afford a better home. Read on.
The OECD’s richest workers are found in Switzerland, with an average gross wage of US$94,600 . Canada’s average wage is only two-thirds that, with an income tax bite of 19.2 per cent compared to 12.1 per cent in Switzerland.
Focusing only on worker incomes, the OECD also reports that for single workers earning $54,000 a year Canadian federal and provincial personal taxes rose from 13.7 per cent in 2015 to 14.4 per cent in 2022. Single workers with average wages paid the same in 2022 as in 2015 despite the federal middle class tax cut. Single earners with 167 per cent of the average wage have seen their average tax rate rise from 26.8 to 27.4 per cent.
When we also consider both payroll taxes and cash benefits, the picture is less grim. Governments have boosted child, elderly and other cash benefits, such as the GST/HST credit. Most single people and couples without children lose over 30 per cent of their earnings to net labour taxes. On the other hand, once these benefits are added in, a low-income single parent with two children has a Swiss-like net tax liability of just 7.5 per cent.
Cash benefits help keep people out of poverty but they come with a significant economic cost since income-testing raises marginal tax rates, sharply. For a single person without kids making the average wage, the marginal tax rate is 42 per cent, which is high enough. But a single person with two children making just two-thirds the average faces a marginal tax rate of 77 per cent due to the clawback of cash benefits.
Cuts in income taxes need to be part of an economic growth agenda for Canada. In Alberta, Danielle Smith has promised to lower the rate from 10 to eight per cent for Albertans earning less than $60,000. That’s not much, but it is a first step in reversing a long list of hikes in income taxes, excise taxes, carbon levies and property taxes that have shrunk Albertan family budgets since 2015.
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