For the first time in Canadian history, more than half of the federal government’s revenue in 2014 will come from personal income taxes -- a vivid sign that Canada’s tax burden is slowly shifting away from corporations and onto consumers.
It’s the apparent result of successive Liberal and Conservative governments that have cut corporate taxes far more aggressively than they have cut personal income taxes, while increasing “hidden taxes” that mostly impact low-income and middle-income workers.
The federal corporate tax rate has been nearly cut in half since 2000 -- from 28 per cent at the turn of the century to 15 per cent in 2012. The Harper government boasts that this will give Canadian corporations the lowest tax rate on new investment of any G7 country.
Personal income taxes, on the other hand, have remained at more or less steady levels through this time. The lowest tax bracket, which now applies on incomes below $42,706, has fallen slightly to 15 per cent today from 17 per cent in 2000. The top marginal tax rate has stayed the same, at 29 per cent.
Which is why -- according to an analysis of recent government data by economist Toby Sanger -- Canadians’ personal income taxes will account for more than half of government revenue next year. That’s up from only 30 per cent five decades ago.
“Tax rates on top incomes and corporations have been cut, while the use of tax loopholes and tax havens have proliferated,” writes Sanger, who works as senior economist for the Canadian Union of Public Employees.
Sanger notes that taxes in Canada have been shrinking: The federal government's overall take this year will amount to 14 per cent of the economy, the lowest since 1940. But Sanger is concerned about who is paying Canada's lower taxes.
“Despite record profits, corporations provide just 13.6 per cent of the federal government’s revenues in corporate income taxes. That’s a third less than the over 20 per cent share they provided during the ‘Golden Age of Capitalism’ from 1946 to 1970.”
Others argue that even as corporations have enjoyed a far more favourable environment in Canada, consumers are getting hit with all sort of “hidden taxes.”
Former Liberal cabinet minister Ralph Goodale recently wrote in HuffPost that the Harper government has "increased the net tax burden on Canadians in each of their last four budgets," pointing the finger particularly at Employment Insurance premium hikes.
That's also the concern of Gregory Thomas, federal director of the conservative-leaning Canadian Taxpayers Federation (CTF), who noted in a recent National Post column that the Harper government has hiked the maximum EI contribution to $4,277 this year from $3,412 in 2008.
Everyone earning $47,400 or more pays the maximum amount, in effect making it a partly regressive tax that impacts middle-income earners much more than high-income earners.
With the EI fund taking in $3.3 billion more this year than it paid out in benefits, the CTF argues EI should be replaced with individual savings accounts, which people can draw from if they lose their employment, or save for retirement.
Opposition parties and retail groups also criticized the Harper government for a number of tariff hikes in its most recent budget, affecting the costs of a wide range of imported goods from shampoo to bicycles to pre-cut vegetables.
Retail groups warned the tariff hikes would mean price increases to consumers, while the opposition NDP charged the Tories with “hitting Canadians right in the pocketbook.”
Sanger, in his analysis, says closing tax loopholes that primarily benefit wealthy individuals and corporations should be the priority for the Tories.
He also urges the government to raise taxes on corporations, a move opposed by both the Harper government and the Liberals, who say it would harm the economy.
“Growth is such an important part of the answer of improving the fortunes of the Canadian middle class, and we cannot do anything that hurts that,” said Chrystia Freeland, the Liberal candidate in this week's Toronto-Centre byelection, recently told HuffPost.