Canada’s Big-5 cities impose a lower tax burden on new business investment than five large cities in the United States, according to a new report from the C.D. Howe Institute. In ‘Business Tax Burdens in Canada's Major Cities: The 2018 Report Card’ authors Adam Found and Peter Tomlinson extend their analysis beyond Canada to comparable US cities.
The authors compare tax burdens on new investment, called Marginal Effective Tax Rates (METRS), in Boston, New York, Chicago, San Francisco, and Los Angeles to those in five large Canadian cities, Vancouver, Calgary, Winnipeg, Toronto and Montreal. The results may surprise some. “Once business property taxes and local taxes are included in our analysis,” says Peter Tomlinson, “the Canadian cities emerge with a notable competitive advantage.”
When only commonly analyzed federal and provincial/state business taxes are considered, the American and Canadian groups appear equally competitive. The US-5 average METR for these taxes is 19.2 percent whereas it is 19.1 percent on average for the CA-5. This is consistent with results obtained by other analysts, says the report. However, once provincial/state property taxes and land transfer taxes are incorporated, along with local taxes, these METRs become 49.5 and 40.2 percent respectively – a notable advantage for Canada.
“When investors evaluate locations, they have to look at alternative cities as well as alternative countries, provinces and states. While average METR results for 10 cities won’t necessarily apply to all of urban North America, they could prompt investors looking only at US locations to look northward,” concludes the report.
For more information please contact: Grant Bishop, Associate Director of Research at the C.D. Howe Institute, Adam Found, Policy Fellow at the C.D. Howe Institute, or Peter Tomlinson, Sessional Lecturer at University of Toronto. Phone: 416-865-9935; email: lbouchard@cdhowe.org