1 / 19

Analysis of the "Flat Tax" Proposal in Canada: Implications and Challenges

Explore the impact of the proposed "Flat Tax" in Canada, focusing on income trajectories, tax fairness, and economic implications for different income percentiles. Learn about the trends in high-income Canadians and the potential repercussions of a flat tax system.

kory
Download Presentation

Analysis of the "Flat Tax" Proposal in Canada: Implications and Challenges

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. The Context of “Flat Tax” in Canada - 2008 Lars Osberg Economics Department Dalhousie University ACEA – October 24, 2008

  2. 30 years of no Growth – for most!

  3. Income Trajectories of High Income Canadians 1982-2005 Murphy, Michaud &Wolfson Statistics Canada IARIW 30th General ConferencePortoroz, Slovenia, August 24-30, 2008 • “growth is largely limited to the top 5% which in turn has been driven largely by increases to the incomes of the top 1%” • “marginal increase in the stability of the high income population” • No Evidence for: “Greater Returns for Greater Risk” Ho

  4. Absolute Change in Income Shares for Various Total Income Quantiles Between 1982 and 2005 Source: Statistics Canada, Special Tabulations from the LAD.

  5. Brian Murphy, Paul Roberts and Michael Wolfson (2007) “High-income Canadians” Perspectives on Labour and Income – September 2007 Pages 5 to 17 Statistics Canada Cat No. 75-001-XIE

  6. Brian Murphy, Paul Roberts and Michael Wolfson (2007) “High-income Canadians” Perspectives on Labour and Income – September 2007 Pages 5 to 17 Statistics Canada Cat No. 75-001-XIE

  7. Rising share of top 5%- a post 1995 issue ?THE EVOLUTION OF HIGH INCOMES IN CANADA, 1920-2000 Emmanuel Saez Michael R. VeallWorking Paper 9607 http://www.nber.org/papers/w9607

  8. Only the top 1% has increase in income share in Canada !THE EVOLUTION OF HIGH INCOMES IN CANADA, 1920-2000 Emmanuel Saez Michael R. VeallWorking Paper 9607 http://www.nber.org/papers/w9607

  9. Marginal Income Tax Rates in Canada: 1920-2000Top Incomes Over the 20th Century: A Contrast Between Continental European and English-Speaking Countries by A.B. Atkinson and T. Piketty Oxford University Press, 2007,

  10. Canada: “both inequality and poverty rates have increased rapidly in the past 10 years, now reaching levels above the OECD average. “OECD (2008), Growing Unequal? : Income Distribution and Poverty in OECD Countries October 2008

  11. Total Tax Rate in Canada – “Flat” & declining Lee, Marc (2007) Eroding Tax Fairness: Tax Incidence in Canada, 1990 to 2005 Canadian Centre for Policy Alternatives, Toronto November 2007

  12. Income & CorporateTax– only progressive elements in tax system Tax cuts greatest at top Income tax crucial to progressivity of system

  13. “Flat Tax” – “them that has, keeps” • Fundamental change in tax structure • Would remove sole progressive element in tax system • Total tax burden then becomes regressive • “Middle 90%” – no increase in income for 30 years • Recessionary losses loom in 2008-2011 • Dramatic income rise of top percentile imply major personal gains from “flat tax” • Corresponding losses imposed on poorer neighbours • Politics in the coming recession – rhetoric of “flat tax” rings hollow

  14. Changes in real income- far larger in top percentiles Brian Murphy, Paul Roberts and Michael Wolfson (2007) “High-income Canadians” Perspectives on Labour and Income – September 2007 Pages 5 to 17 Statistics Canada Cat No. 75-001-XIE

  15. Income Tax data show increase in income share of top 1% of families of 3.4 percentage points in twelve years 1992-2004 – a very large change in historical context ! Brian Murphy, Paul Roberts and Michael Wolfson (2007) “High-income Canadians” Perspectives on Labour and Income – September 2007 Pages 5 to 17 Statistics Canada Cat No. 75-001-XIE Statistics Canada (1998) Income Distribution by Size in Canada Catalogue No. 13-207. CANSIM Table 202-0701V1546461 to V1546465 J.R. Podoluk (1968)Incomes of Canadians, Dominion Bureau of Statistics.

  16. The BIG NEWS in Canada & USA – sharply rising income share at very topTHE EVOLUTION OF HIGH INCOMES IN CANADA, 1920-2000 Emmanuel Saez Michael R. VeallWorking Paper 9607 http://www.nber.org/papers/w9607

  17. Lessons from Canadian Income Tax dataTHE EVOLUTION OF HIGH INCOMES IN CANADA, 1920-2000 Emmanuel Saez Michael R. Veall Pp. 226-227 in A.B.Atkinson and T. Piketty Top Incomes in the 20th Century Oxford University Press 2007 • Canada, UK, US, France – top income shares fell sharply during WWII & stayed down for 30 years • 1980-2000: sharp increase in top end shares • Concentrated in top 1% & even larger for top 0.1% • Not driven by tax law changes - no coincidence in trends • But big decline in top marginal rates • Similar trends for individual & family income • Not result of greater spousal income correlation • Income mobility – same or decrease since 1980 • Same concentration trend in 3 & 5 year average income • Probability still in top 0.1% approx same 1982-2000 • Labour income increase greatest in top 1% - • Less among Francophone Quebecers • Lags US increase in top CEO compensation • WHY? • Skill biased tech change cannot explain concentration of income gains • Emigration option to USA & ‘Brain Drain’ – the ‘threat effect’ & keeping up with US CEO salaries

More Related