The average Canadian is paying 70 per cent more in income taxes than their American counterpart and if rates were the same, it would mean an annual savings of $4,000 per person.
According to a study by the Business Council of Alberta, the median income earner in Canada is taxed at an average of just over 17 per cent, including both federal and provincial taxes, far above that of the highest-taxed U.S. states.
“I don’t think anybody was surprised to learn Canadians pay more in taxes than Americans, but we tend to forget that this high tax bill comes with very real consequences,” vice president of Communications at the Montreal Economic Institute Renaud Brossard told True North.
There are variations depending on where one lives, with Nova Scotians being taxed the highest at one-fifth of their income, while median-earners in British Columbia and Ontario pay the least at 15 per cent.
Median earners in Quebec, Manitoba, and Saskatchewan are somewhere in the middle, being taxed at 18 per cent.
However, median income earners across every state in the U.S. bear a lighter tax burden.
Even New Yorkers, who live in the highest taxed state in the country only pay 12.47 per cent. The median income earner in California, also known as a high-tax state, has a combined tax bill of 10 per cent.
“This is more proof that Canadians are overtaxed. Canadians pay too much tax because our governments waste too much money,” federal director of the Canadian Taxpayers Federation Franco Terrazzano told True North.
“The best way governments can make all aspects of life more affordable is to stop taking so much money from us in the first place.”
Of the nine U.S. states with no state-level income tax such as Florida, Texas and Washington, people only pay between 7 and 8 percent.
This means Canadians would save nearly $4,000 annually if it were on par with America’s average income tax rate.
It’s not just the U.S. that Canada trails behind when it comes to income tax competitiveness. The Organisation for Economic Co-operation and Development ranked Canada 31st out of 38 industrialized countries when it comes to having the highest individual taxes. It also ranked 26th for business tax competitiveness.
“As a result of this high-tax environment, we have lowered economic mobility, meaning Canadians have less of a chance, no matter their efforts, to rise up the income ladder and make themselves better off,” said Brossard.
Both the Conservatives and Liberals campaigned on a middle-class tax cut and the Carney government has pledged to reduce the lowest federal tax bracket by one percentage point on July 1.
This change will save the typical Canadian around $400 a year.
“If this new federal government wants to make the Canadian dream into a reality again, it will need to do much more than a one percentage point cut to the first tax bracket,” said Brossard.