100 years of paying the man

Photo: Fraser Institute

Canadians have been paying the man for a century – the taxman, that is.

Personal income tax was brought in as wartime revenue generator in 1917.

Since then, it has morphed into a costly, complex behemoth that’s difficult to administer and makes Canada uncompetitive, the Fraser Institute argues.

“The fears policymakers had in 1917 when the personal income tax was introduced – that governments would become dependent on it and that it would hurt our competitiveness – have all come,” said William Watson, acting chairman of the Department of Economics at McGill University, a co-editor of the study.

“Just filing their taxes costs the average Canadian family $500 in time and money, even before they get to what they owe,” Watson said.

In 1917, just two per cent of Canadians filed taxes, accounting for 2.6 per cent of federal revenues. Fast forward to today, and 75 per cent file income tax returns, and the share of federal revenue has grown to 51 per cent.

A hike to the top federal rate to 33 per cent in 2016 brought Ontario’s combined federal-provincial tax rate to 53.5 per cent, making it the third highest in the G7 behind only France (54.5 per cent) and Japan (55.9 per cent).

Canadian provinces have seven of the eight highest top combined rates in all of North America. Even B.C., which has Canada’s lowest combined top rate (47.7 per cent), is still higher than 42 U.S. states.

“Canada is already uncompetitive with the U.S. on personal income taxes, and with the Trump administration vowing to reduce taxes further, that gulf will likely grow,” Watson said.