May 18, 2011 – Quebec residents, on average, face the worst tax bite on take-home pay in the country, according to a report from the C.D. Howe Institute. In “What Has Happened to Quebecers’ Marginal Effective Tax Rates?” authors Alexandre Laurin and Finn Poschmann examine Quebecers’ marginal effective tax rates (METRs), which measure the impact of federal and provincial income taxes combined with the impact of reductions and clawbacks on income-tested tax credits and benefits.
Income-tested credits and benefits, explain the authors, mostly target financial support to low-to-middle-income families with children and to low-income seniors. However, the clawbacks and rate reductions that apply to those credits and benefits, as incomes rise above set thresholds, raise METRs for their beneficiaries.
Overall, METRs are lower than a decade ago, when the province and federal government implemented significant personal income tax reductions, say the authors. But for many low-to-middle-income Quebec families with children, they are higher. The province’s residents generally face the highest tax rates in the country, with an average METR in 2011 exceeding the national average by four percentage points.
Policymakers in Quebec and elsewhere, who are interested in keeping down METRs overall, should focus on a broad tax base and low, flat rates, the report concludes, rather than implementing or expanding targeted benefits that make general tax relief
more difficult to achieve.
Click here for the full report.
For more information contact:
Alexandre Laurin, Associate Director of Research,
or Finn Poschmann, Vice President of Research,
C.D. Howe Institute, 416-865-1904;
email: cdhowe@cdhowe.org