Taxing trend Poor carry bigger burden than rich 2007
TORY ZIMMERMAN/TORONTO
Les Whittington
After years of tax cuts,
the top 1 per cent of families was by 2005 paying a lower percentage of their
income to governments than those at the bottom of the income scale, according to analysis of the tax system published
today by the Canadian Centre for Policy Alternatives.
"Canada's tax system
now fails a basic test of fairness," said Marc Lee, a senior economist
with the Ottawa-based think tank.
"
The policy centre said the
trend is eating away at the concept that underpins the tax system the notion
of progressiveness that says those with a greater ability to pay should
contribute more than others.
Lee's analysis tracks the
percentage of all earnings Canadians in different income brackets send to
federal, provincial and local governments in the form of income, payroll and
property taxes and in fees.
It finds that the rich, with
annual incomes of more than $265,000, saw their tax rate decline dramatically
between 1990 and 2005 by nearly 4 percentage points to 30.5 per cent.
In contrast, those in the
bottom 10 per cent of income earners with earnings of $13,500 or less
watched their rate rise by 5 percentage points to 30.7 per cent.
The study, Eroding
Tax Fairness: Tax Incidence in Canada 1990 to 2005, says that over the
same period most Canadians saw their tax rate fall by about 2 percentage
points.
But middle-income families
still pay about 6 percentage points more in total taxes than a family in the
top 1 per cent.
"We've lost progressivity, particularly at the very top of the earnings
distribution, and we should be aiming to have a tax system where the most able,
the most affluent in our society, are paying a greater share of their income in
taxes," Lee said in an interview.
He said this development over
15 years owes much to provincial income tax cuts such
as those brought in by the governments of Mike Harris when he was
But the trend toward a
regressive tax system, where the share of income paid in tax drops as income
rises, has been accelerated since 2000 by billions of dollars in tax reductions
by the federal government, according
to his analysis.
Lee said this shift can
only pick up steam as a result of the six-year, $14 billion cut in corporate
taxes decreed in the Harper government's Oct. 30 mini-budget because those who
benefit from corporate earnings tend to be at the upper end of the earnings
scale.
"Essentially, it's a
fairly large upper-income tax cut," he said, adding that it means the
whole system will likely become more unfair.
"This is going to make
that trend of the regressive pattern at the very top all the worse."
The study notes that after
the mid-1990s, policymakers in
By the early 2000s, most
provincial governments had joined in with tax cuts and it is these provincial
measures that have driven the reduction in total taxes more than federal tax
changes, the study concludes.
Upper-income earners
benefited from a 2001 federal decision to eliminate the 5 per cent
"high-income surtax" and from preferential treatment of capital gains
from the sale of stock market shares and real estate.
The affluent were also better
able to take advantage of increased allowable tax deductions for RRSPs, Lee said.
At the other end of the
scale, low-income earners saw their tax rates accelerate as a result of
increases in payroll, consumption and property taxes, as well as user fees.
The analysis concludes
that there is scope for raising income taxes at the top of the income ladder to
make the system fairer.
"Such changes would
help to ensure those who can afford to contribute more for public goods and
services valued by all Canadians can do so," the study says.