Canadians Are Mulling A Flat Tax
June 2, 2000
With 85 percent of respondents to a Canadian poll objecting to their country's high levels of taxation, Canadian conservatives are advancing proposals for a flat or single-rate tax.
Canada's top federal-provincial rate of personal income tax is about 48 percent -- and it kicks in when workers have earned the U.S. equivalent of about $41,000. The U.S., by comparison, has a top tax rate of about 39.6 percent that doesn't apply until earnings exceed about $285,000.
So with taxpayers steaming, the Canadian Alliance -- the country's opposition party -- is offering its 17 percent personal flat tax plan.
Here are some of its features, with all monetary references in Canadian dollars:
- The personal exemption would be set at $10,000, there would be a deduction of $3,000 per child, and the 5 percent surtax would be eliminated.
- The limit on tax-exempt retirement contributions would be raised to $16,500, and there would be a 30 percent cut in employment insurance premium rates.
- The single-rate tax would reduce the top federal-provincial tax level to roughly 29 percent over five years -- and eventually relieve 1.9 million Canadians from paying taxes altogether.
Not unmindful of the political stakes involved, Canada's ruling Liberal Party has offered its own tax-reform plan. But observers report that it consists of only tinkering at the margins.
Source: Michael Taube (analyst and commentator), "Canadians' Bacon: Flat-Tax Proposals Sizzle as Canadians Flee High Taxes," Investor's Business Daily, June 2, 2000.
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