Unformatted text preview: rns on investment than the average Canadian. However, only
3% of total incomes for the richest 1% of Canadians comes from business revenues,
which is exactly the same proportion as for the average Canadian. The super rich
were less likely than the majority of Canadians to rely on business income (only 2.4%
of their total income was business income). the rise of canada’s richest 1 % 15 chart 7 Major Sources of Income, Then and Now
70% Top 1% in 1946 65% Top 1% in 2007 Average Taxﬁler in 2007 60%
0% Wages Professional Fees Business Income Dividends Interest Income Investment Income The main reason the rich are getting richer is how much they are getting paid.
The flip side is how much they are getting taxed. Here, too, the trends make clear:
this generation of affluent Canadians has both made more cash and has kept more
of it than any generation since the 1920s. make that a double: lower rates of taxation for the richest
Canada’s pre-tax distribution of income is getting more concentrated at the top and
taxes are not mitigating those results as they once did.
Marginal tax rates have fallen dramatically over the past half-century for Canada’s
richest. In 1948, the top marginal tax rate levied on taxable incomes over $250,000 (in
1948 dollars) was 80%. In 2009, the top marginal rate levied on income was 42.92%,
averaged across all provinces — and it applied to all incomes over $126,264.10 The top
marginal tax rate varies from province to province.
An income of $126,264 today compares to an income of about $13,00011 in 1948
dollars. In 1948, the tax rate on incomes over $13,000 was 45%. There were also seven
more federal tax brackets that kicked in as incomes rose above $13,000, with escalating rates of taxation. In all there were 19 tax brackets in Canada in 1948.
10 Until 1972, income tax was levied only by the federal government. Incomes referenced are all taxable
i ncomes, i.e. after deductions and credits. After 1972 provincial taxes were levied as a percentage of the
federal tax. The federal tax structure is designed around an assumed provincial tax rate, which accounts
for and synthesizes variations across the country. The combined federal/provincial marginal tax rate is
provided by the Canadian Tax Foundation, Table 3.5 in the 2009 edition of Finances of the Nation. In 2009
t he top federal marginal tax rate was 29%. 11 Using the Bank of Canada inflation calculator. 16 growing gap project The top tax bracket of $250,000 in 1948 would translate to $2.37 million today.
That means 80% of incomes above that amount would have been taxed back in 1948.
Not many Canadians fall into that category, but those who do get taxed at half the
rate that they would have in the past.
All income tax systems come with surtaxes and credits or deductions; and since
1972 both federal and provincial governments apply income taxes. The Saez-Veall
data show trends from 1920 to 2000 in the top marginal tax rate, taking these different factors into account.
Since each jurisdiction has a different tax structure (number of tax brackets, surtaxes and exemptions) the Saez-Veall data chose to track Ontario only, as an example
of trends in top marginal tax rates. As mentioned, the top tax rate is triggered for
incomes over $126,264. Revenue Canada’s tax statistics show that almost two-thirds
(63%) of Canadians making more than $150,000 live in Ontario and Alberta (42% in
Ontario). The top marginal tax rate is even lower in Alberta.
Graphing their findings provides a striking image, one that evokes the U-turn
of falling, then rising, income shares for the richest Ontarians — but upside down.
The top marginal rates of taxation start off high in the 1920s, drop sharply over the
course of the 1920s, spike up to cover first the costs of the Depression years, then the
Second World War, and decline thereafter, with two important drops in the early1970s and the early-1980s.
These data end in 2000, just when a big wave of tax cuts started to wash over every
jurisdiction in Canada. At the federal level alone, over $100 billion in personal and
corporate tax cuts were implemented over 5 years, starting in 2000. A further $220
billion in federal tax cuts have been implemented or scheduled since 2006. In addition, virtually every province has redu...
View Full Document
- Fall '08
- Progressive Tax, Statistics Canada