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Canada’s marginal tax rates are much higher than America’s, with greater increases across income levels

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Tax forms and Canadian currency are shown together in this photo illustration taken in Toronto on Sunday, April 3, 2016. Graeme Roy/The Canadian Press

Across Canada and the United States, it is Canadian provinces that have the highest marginal tax rate for incomes over $150,000, and the steepest rise of marginal tax rates for those moving from $75,000 to $150,000 in income.

The marginal tax rate is the tax rate an individual pays on each additional dollar earned within a tax bracket. For this analysis, The Hub looked at the combined federal and provincial or state marginal tax rates for individuals in Canadian provinces and American states.

In particular, using data compiled from the Government of Canada and the U.S. Tax Foundation, The Hub examined the marginal income tax rates that Canadians and Americans pay at three income levels: $75,000, $150,000, and $300,000 CAD. We found that for incomes of $150,000 and $300,000, Canada’s marginal income tax rates are all higher than those of our neighbours to the south.

The lowest top marginal tax rate for an income of $75,0000 is 28.2 percent, in British Columbia. The lowest equivalent rate in the United States is 22 percent in tax-free states such as Florida, Texas, or Washington. Of the 61 North American jurisdictions, Quebecers face the highest combined marginal tax rates on their incomes up to $150,000; 39.5 percent on incomes of $75,000, and 53.3 percent for incomes of $150,000.

Nova Scotia has the second highest tax rates on income, with 37.17 percent for an income of $75,000 and 47 percent for an income of $150,000. The Maritime province also features the highest marginal tax rate on incomes over $300,000, 54 percent. Its highest-ranking marginal rate on income over $300,000 is followed by Newfoundland and Labrador (53.8 percent), Ontario (53.5 percent), British Columbia (53.5 percent), and Quebec (53.3 percent).

By comparison, in the United States the highest marginal tax rates on $300,000 income are in Oregon (41.9 percent), Minnesota (41.8 percent), and California (41.3 percent).

Canadian provinces also have steeper increases in the marginal tax rates when moving between different income levels. British Columbia for instance has a 12.5 percentage point jump in the tax rate moving from the $75,000 to $150,000 income level, and another 12.8 percentage point increase from $150,000 to $300,000.

The rate increases across the American states are generally less marked. The largest is in Minnesota, where rates jump by 10 percentage points from the $150,000 to $300,000 income levels. Most however are within a band between four and eight percentage points.

Canadians pay more taxes compared to those in the United States because of this country’s more extensive social services, such as universal healthcare. Research also suggests that Canadians will face a higher tax burden in the future because of the current federal government’s program spending.

Last week in his Hub DeepDive analysis, University of Calgary economics professor Trevor Tombe analysed Canadian tax competitiveness among high-income earners. High Canadian marginal taxation relative to the U.S. is likely becoming a push factor for high earners moving south of the 49th parallel, he wrote. For example, Alberta’s highest tax bracket of 15 percent of income kicks in for every dollar earned over $355,845. California, meanwhile, takes only 13 percent of income for every dollar earned over US$1,000,000.

The Week in Polling: A ‘broken’ Canada, housing costs fueling Canadian emigration, Trump versus a Biden replacement, and a Labour landslide in the U.K.

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Trudeau rises during question period in the House of Commons on Parliament Hill in Ottawa, Wednesday, May 1, 2024. Sean Kilpatrick/The Canadian Press.

This is The Week in Polling, your Saturday dose of interesting numbers from top pollsters in Canada and around the world, curated by The Hub. Here’s what we’re looking at this week.

Seven in ten Canadians think Canada is “broken”

Conservative Leader Pierre Poilievre has long highlighted the issues of high inflation and rising food, fuel, and housing costs, saying, “It feels like everything is broken in this country right now.”

Prime Minister Trudeau vigorously disagrees. “Let me be very clear for the record: Canada is not broken,” he has said. “We’re going to get through these tough times because we’re going to do it together. And this is important: when we say we’re building a stronger future for everyone, we mean all Canadians, no matter who you voted for.”

But polls show seven in 10 Canadians agree with Poilievre’s sentiment. Agreement is higher among younger Canadians—78 percent of Canadians ages 18-34 agree with Poilievre—and Conservative voters, with 96 percent agreeing with the party leader.

Disagreement with Poilievre is higher among Canadians over the age of 55 and those living in Quebec—39 percent of either group disagree—and Liberal voters, as 66 percent believe Canada is not broken.