Canada needs to stop following the U.S.’s example when it comes to extending low-income tax credits to middle-income earners, according to a Fraser Institute report released this morning.
Tax Payers and Tax Takers: Is the Trend of Tax Progressivity in the U.S. Emerging in Canada? finds that Canada is seeing that income tax credits that were originally intended for low-income earners are now increasingly available to middle-income earners.
“We’re starting to see the expansion of key programs like the Working Income Tax Benefit,” said study co-author and Fraser Institute executive vice-president Jason Clemens.
“If that trend continues like it has in the U.S., a larger and larger share of the population will be exempted from income and payroll taxes, leaving the rest of society to pay a bigger share.”
In 2011, the study found, the U.S. Tax Policy Center found that 46% of Americans had no income tax liability, while the remainder, 54%, had “significant” tax liability.
The study found that an increasing number of taxpayers face no income tax liability, which is similar to what is happening in the U.S. For example, in 2000, 32% of Canadian tax filers faced no income tax liability; in 2010, this increased to 38%.
Clemens said that in order for taxpayers and citizens to be mindful of the cost of government, they must share some of the burden of paying for it.
“Democratic systems don’t work well when you have large percentages of the population who don’t see the cost of government in any meaningful way,” he told Business in Vancouver.
“Canadians need to be more vigilant about understanding the benefit of these programs being targeted for low-income individuals and households, and the real risks if they creep into becoming programs for the middle class.”
