Income Tax Rates Hurt Competitiveness

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    Rising federal and provincial personal income tax rates on highly skilled, educated workers (such as entrepreneurs, business professionals, engineers, and doctors) are hurting Canada’s economic competitiveness, says a study by the Fraser Institute. ‘Canada’s Rising Personal Tax Rates and Falling Tax Competitiveness’ finds that Canada’s top combined federal and provincial tax rate, which is 53.5 per cent (using Ontario’s provincial rate), now ranks as the sixth highest among 34 industrialized countries and second highest among G7 countries, behind only France (based on 2014 figures, the latest year of available international data). The federal budget “offers the Liberal government an opportunity to put in place policies that match their rhetoric about the importance of policies that attract and retain highly skilled workers, entrepreneurs, and investors,” says Charles Lammam, director of fiscal studies at the Fraser Institute and study co-author. “Competitive personal income tax rates are critical to fostering a positive economic climate but recent tax increases, federally and in many Canadian provinces, harm our ability to attract skilled workers and in fact discourage Canadians from realizing their full potential.” For example, this year Canada’s Liberal government introduced a new income-tax bracket, increasing the top federal tax rate to 33 per cent from 29 per cent. This increase in the federal tax rate comes on top of numerous recent increases to top rates in Ontario, Alberta, and other provinces.