CALGARY — A new study is confirming something to which some may have already known — top earners in Canada are paying nearly two-thirds of Canada's total income tax.A study conducted by the Fraser Institute found the top 20% of income households (ranging from $270,472 and above) paid 65% of the overall income tax revenue.They also covered more than half (58%) of all taxes in the country.On the opposite end of the spectrum, the bottom 20% of earners (earning up to $63,068) contributed 1.7% of Canada's total income tax..This works out to the top 40% of income earners (earning $171,299 and up) paying 85% of the country's total income tax.The study concludes this is due to Canada's progressive tax system, ie, when income increases, so does the percentage of tax deducted from that income.The study highlights how this can actually reduce productivity in Canada's economy, stating "many taxpayers will change their behavior in ways that reduce their taxable income through tax planning, avoidance, or evasion that results in governments raising less revenue than anticipated."It also reduces Canada's economic competitiveness, making "Canada a less attractive place to live and work for highly skilled people such as doctors, scientists, managers, and software engineers.".This can push too many highly skilled earners to move to the US, Canada's "competitor for top talent.""Migration from Canada to the United States by high income and skilled STEM workers is a major potential source of foregone income tax revenue, especially over the lifecycle of these highly skilled workers," the study pointed out."Canada’s proximity to and economic integration with the United States amplifies the behavioural response of taxpayers when facing new or higher taxes."They also state there is evidence to suggest a proportional increase in income tax based on earnings actually does not generate as much revenue as governments expect.With people attempting to avoid the extra taxation by reducing taxable income, such as by "working less or negotiat[ing] with their employer to shift some of their compensation from taxable income to other benefits."
