OTTAWA—Canada should raise federal personal income tax rates on the rich to close the growing income gap and to bring them more in line with those in the U.S., says a study released today by the Alternative Federal Budget project of the Canadian Centre for Policy Alternatives.
The study, by economist Andrew Jackson, points out that Canada's top federal tax rate is considerably lower than the U.S.: The top U.S. tax rate is 35% on incomes over $326,000 and 33% on incomes over $150,000; Canada's top federal income tax rate is 29% on incomes of over $116,000.
"We're heading into the holiday season—the season of charitable giving—where we'll hear a lot about how those who have should give to others," says Jackson. "But charity isn't enough. Instead of continuing to deliver more tax cuts to the rich in the name of competitiveness, Canada should make sure that the wealthy contribute their fair share in taxes."
The study marshals evidence showing that income inequality is growing rapidly as Canada's richest 1% take home an increasing share of pre tax income, and have also been given a disproportionate share of recent income tax cuts.
"This is disturbing because a progressive income tax is a particularly important way to promote fairness in the North American context, and because only higher tax rates for the very rich can stop that elite group from growing away from the rest of society."
"Our governments are leading the nation towards a regressive tax system where the rich contribute less despite their growing ability to contribute," Jackson says. "Let's be clear: taxes fund the kinds of things Canadians say they need to be productive citizens, such as public health care, affordable housing, university tuition, and quality child care."
The study calls on the federal government to: Implement a modestly higher new tax rate of 31.5% on taxable income of more than $250,000; and to close a major tax loophole for the very rich by implementing full inclusion of capital gains income. 43% of all capital gains income goes to taxpayers making more than $250,000.
A 2006 Environics Research poll indicates the majority of Canadians support closing tax loopholes for wealthy individuals (82%) and increasing taxes on the wealthy (70%) as a way to reduce the growing gap between the rich and the rest of us.
The Alternative Federal Budget, coordinated by the CCPA, incorporates the priorities of a wide range of prominent civil society organizations representing millions of Canadians.
Why Charity Isn't Enough: The Case for Raising Taxes on Canada's Rich is available on the CCPA web site: http://www.policyalternatives.ca
For more information contact Kerri-Anne Finn, CCPA Communications Officer, at 613-563-1341 x306.