Much of the recent discussion regarding income gaps between the rich and the poor has been focused on the United States, fostered as it has been by the Occupy Wall Street movement and the top 1% of income earners.
The widespread opinion is, as World Bank economist Branko Milanovic puts it, that “income inequality hurts growth” and that “improved equality can sustain growth.”
Rather than borrowing conclusions from other jurisdictions (such as the U.S.), we can gain a better understanding of how incomes are shared in this province and others through the most recent tax filer data (for 2009). The data, published by the Canada Revenue Agency (CRA), provides insights into the total assessed income from all sources earned by Canadian residents, as well as the amount of personal income taxes paid.
The CRA data is published for income ranges, not for shares of the population, so it’s not possible to directly address the top 1% of earners or any particular percentage group. That said, we can consider the number of tax filers in 2009 against B.C.’s adult population in that year.
In 2009, there were an estimated 3.81 million people aged 15 and older in B.C.; of these, 90%, or 3.41 million people, filed an income tax form, leaving an estimated 394,000 adults (10% of the population) who did not file. Of the 3.41 million returns that were filed, 1.19 million were non-taxable (35% of all returns filed) and 2.23 million were taxable (65%).
Interestingly, the data shows that only 59% of the adults in B.C. (2.23 million people) paid taxes in 2009, while 41% did not (1.58 million people). This is the smallest share of taxpayers as a share of the adult population among all nine Canadian provinces for which data were available. P.E.I. fell at the other end of the spectrum, with more than two-thirds of its adult population (67%) paying taxes. The variance between provinces is due to a range of factors, including demographics (for example, Alberta has a relatively smaller older population and a proportionately larger working-aged one), economic structure and the variety of deductions, rebates and social services programs offered in each province.
Given how much attention has been paid to the highest income earners in recent years, what is more interesting is the distribution of incomes in B.C.
In 2009, 21,420 income tax filers in B.C. reported an income of $250,000 or higher. With 3.81 million adults in the province in that year, those that fell into the highest income bracket represented only 0.56% of B.C.’s adult population. Perhaps not surprisingly, Alberta’s top income earners were more abundant. However, with a smaller adult population (3.02 million), the 36,470 people who reported incomes of at least $250,000 in 2009 represented a much larger share (1.20%) of Alberta’s adult population than in B.C.
Although Ontario’s high income earners fell in the middle, representing 0.72% of its adult population (78,730 out of 10.94 million), the total number of Ontarians in the highest income bracket was greater than all of the other nine provinces combined.
From a distributional perspective, it’s also interesting to consider the proportion of all tax filers that could be classified as high, middle and low income earners.
Although what is deemed to be high versus low varies greatly, using the range of assessed incomes of $100,000 and above as the high income group, the data shows that these individuals represented 5% of all tax filers in B.C., compared with 6% in Ontario and a whopping 9% in Alberta.
Given this, it might be expected that Alberta would have a wider income gap than B.C. or Ontario; with only 58% of Alberta’s tax filers in the low income group in 2009 (less than $50,000), Alberta actually had the smallest income gap (49 percentage points) across provinces. This compares with a gap of 59 percentage points in Ontario and 61 points here in B.C. Atlantic Canada had the largest gaps, ranging between 67 (Nova Scotia) and 73 percentage points (P.E.I. and Newfoundland).
With aging populations and an increasing number of people heading into retirement, the focus on these types of issues will only increase over time.
Recently CUPE and the Canadian Labour Congress recommended doubling CPP benefits to even out incomes through the later stages of life, a step that would directly affect all businesses in Canada.
While only providing a snapshot (with a fast shutter speed) of the landscape of incomes in B.C. and in selected other Canadian provinces, this data is a good starting point for further discussions about the extent of income equality in this province, how we compare with other provinces in Canada, what it means for economic growth and what we should do about it.
