Why are Canadian Tax Rates Less Progressive than the US?

[warrioreowyn]

I was actually quite surprised at this, since we're supposed to be more politically progressive than the US, but when it comes to income taxes we definitely aren't. And this is counting the Bush tax cuts. Rates, rounding to the nearest thousand:

Canada
$0-$39,000: 15%
$39,000 - $78,000: 22%
$78,000 - $126,000: 26%
>$126,0000: 29%

United States$

Comments

[kev_n_r]

One reason is that we have much less people who actually make more than 126k. It's not unusal to find someone in the US who make over 100k or even 200k salaries.

Another reason is that a similar tax in Canada would discourage anyone here from aiming for high executive positions in Canada when they could pursue the exact same position in the US for 3-4x the money. US salaries in higher positions are much more competitive.

ie: Average salary for an auto line worker in Canada is likely to be half of less than that of the same position in the US. That gap only grows as you get to the higher position salaries.

[warrioreowyn]

There are aspects of sales taxes that appeal to me (they might discourage consumerism), but they are simply much more regressive than income taxes and that's a strong argument against them. The less money someone has, the higher a proportion of their income they spend - because it's just a lot easier to spend, say 75% of $40,000 than 75% of $300,000 in a year.

If you want to reduce income taxes, I'd prefer a higher capital gains tax to discourage speculation and the bubble economy. We should reward work more than we do legal gambling.

[mijopo]

This is interesting, thanks for posting. A few other things to note

[thebookpile]

Minor quibble:
Canada's lowest tax bracket starts at $9600, not $0.

So:
Canada
$0-$9600: 0%
$9601-3900: 15%
(...)

United States
$0-$8000: 10%
$8000-$33,000: 15%
(...)

[warrioreowyn]

strbjun mentioned that too, but I haven't seen it mentioned on the sites I looked at to get the rates. Do you have a source?

[thebookpile]

"Schedule 1" of the 2008 federal tax forms.

[sun_tzu]

It's actually over $10M now, I can't remember what the basic personal exemption is but I know it's into five digits. You then get the employment income credit on top of it.

[sun_tzu]

If I remember right it's $10100 federal and $9600 provincial in Ontario. Ontario kicks in a few other credits for some but we also have the "health care premium" tax which appeared with McGuinty. What a guy he is, he at the same time delisted a myriad of services and implemented a health care tax. So we started having to pay to get less. And yet he got re-elected despite this and the other lies that got him elected the first time. Of course it was more a comment on the abject failure of the Ontario PC Party. They should have been able to run a monkey against McGuinty and won yet managed to blow it.

[harry_beast]

Not everyone benefits from increased taxation on Canada's highest earners, for example, the highest earners themselves, who already shoulder a disproportionate share of the tax burden. We'd probably lose a lot of them. High earners are often more mobile than low earners. Driving high earners out of the country has several potential consequences

[warrioreowyn]

People aren't going to leave the country over a couple percent increase in some of their taxes.

[sun_tzu]

They don't have to physically leave. Ever tax hike makes arranging one's affairs to avoid taxation more economical. It really isn't hard to do, it just costs money to put the structures in place to do it.