http://money.canoe.ca/News/Economy/2007/11/07/4639072-cp.html
Story http://money.canoe.ca/News/Economy/2...639072-cp.html
OTTAWA - The era of tax cuts ushered in by federal and provincial governments in recent years have made Canada's tax system so regressive that the country's richest now pay the lowest rates of all income groups, says a report to be released Thursday.
The report by the Canadian Centre for Policy Alternatives, an advocacy research group that has pressed in the past for more social spending and bigger taxes on corporations and higher-income Canadians, looked at what percentage of income Canadians pay in taxes to all levels of government.
The study shows that Canada's progressive tax system has become less so between 1990 and 2005, and for the richest Canadian families - those with annual earnings of $266,000 a year and more - the era of tax cuts since the turn of the century has been like manna from government.
Those very rich Canadians paid 30.5 per cent of their income in federal, provincial and municipal taxes in 2005, as opposed to the 30.7 per cent for those with incomes under $13,523, the lowest 10 per cent of family earnings.
That's a big difference from 1990, when the top one per cent of earners paid 34.2 per cent of their incomes in taxes, as opposed to 25.5 per cent for families in the bottom 10 per cent.
"The tax system as gotten less progressive," said the group's senior economist Marc Lee.
"There's something in the overall tax system now that most people would find offensive. The idea that someone who is in the upper middle class is paying a higher tax rate than someone much wealthier is not fair."
In last week's mini-budget, Finance Minister Jim Flaherty cut the GST as well as personal, corporate and other taxes by $60 billion over five years, declaring that "Canadians pay too much tax."
In recent years, several provincial government have also cut taxes, but in many cities, property taxes and users fees have been rising as local governments try to cope with rising costs and service demands.
The highest taxed Canadian families are those earning between $120,000 and $151,000, who pay 36.9 per cent of their income in taxes. This group is followed closely both those earning $57,460 and $72,299 - whose tax bill represents 36.5 per cent of their total income.
Lee said his report is different from other such analyses in that he included all sources of income, including salaries, inheritances, employer provided benefits and capital gains. As well, the report calculates all taxes, including property and corporate taxes and user fees charged by governments.
He said he chose the 1990 to 2005 timeline because the last time a similar methodology was used to analyze the Canadian tax system was in 1988, and because the 15 years covers a time of government deficit cutting and tax hikes, followed by several years of tax cuts.
The main finding is that on average, tax rates dropped by two per cent between 1990 and 2005 as both federal and provincial governments undid the tax increases of the 1990s with deeper and broader reductions.
But the relief wasn't spread equally. Those in the top one per cent of earners actually saw their tax bill drop by about four per cent, whereas those at the very bottom saw the take rise by five per cent.
Lee said although the lowest income earners generally pay no or very little income tax, they do pay a disproportionately high amount in relation to their income in sales taxes, property taxes and other government revenue generators, such as gaming and liquor sales.
Tax cuts by provinces was the main impetus behind the flattening of the system, says Lee, although federal cuts, such as the elimination of the five per cent high income surcharge after 2001 also reduced progressivity.
Provincial taxes are less progressive than federal levies because of their greater reliance on sales tax and fees for such things as driver's licences. As well, provinces generally have flatter provincial income tax rates.
"Provincial income tax cuts are the major culprit behind Canada's eroding tax fairness, an important consideration given allegations by the provinces of a fiscal imbalance in Canadian federalism," the report finds.
Lee said the study shows there is much more room for governments, particularly provinces, to levy higher taxes on upper income families.
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