NCPA - National Center for Policy Analysis

Canada Plans Tax Cuts

February 23, 2000

Canada has some of the highest taxes in the industrialized world -- prompting considerable numbers of its citizens to flee to the U.S. The government in Ottawa is expected to propose tax cuts equivalent to US$31.7 billion over five years -- the deepest cuts in the country's history.

Despite the intricacies and irrationalities of the U.S. tax code, at least our tax bite is considerably lower than it is in Canada.

  • The long-term capital-gains tax rate in Canada is about 37 percent -- compared to 20 percent here.
  • Personal income tax rates in Canada also are higher and kick in faster.
  • For example, the top marginal federal and provincial income-tax rate for residents of Ontario is 48.8 percent and kicks in on income the equivalent of US$44,800.
  • In high-tax California, personal income of $44,800 would be taxed at a combined federal and state rate of 25 percent.

Unlike U.S. residents, Canadians cannot deduct home mortgage interest and they pay sales taxes that usually exceed 15 percent.

Some of Canada's brightest citizens -- and sometimes entire companies -- are headed south. According to the Conference Board of Canada, 98,000 Canadians obtained visas to work in the U.S. in 1997 -- nearly six times the 16,900 who did so in 1986. Observers say these fleeing workers are "the cream of the crop" -- Ph.D.s, executives and technicians.

Source: Joel Baglole and Julian Beltrame, "Canada Plans to Propose Major Tax Cuts," Wall Street Journal, February 23, 2000.


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