November 21, 2018

Ottawa’s tax hike on the one per cent ended up lowering government revenues

Tax codes and how to balance them to ensure all citizens are taxed fairly to support their government’s revenue are a complex subject. On its face, the subject can be boiled down to increasing how much revenue comes in from taxes, or decreasing what amount of revenue the government spends on any of its efforts. Yet simply raising rates doesn’t necessarily boost how much tax revenue a country might collect. Canada is facing that with a recent tax hike on the top one percent incomes that has seen total tax revenue collected actually fall.

“For years, it has been long-argued by various economists that a government is only able to raise taxes so high before the rate itself creates a psychological barrier to work such that reduced economic activity by those high income earners leads to a reduction in tax revenues.”

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