This study compares the progressivity of the income tax of Quebec and Ontario. After observing the predominance of income taxation in Quebec and Ontario, by way of international and interprovincial comparisons and illustrating the presence of progressivity in both provinces, progressivity indicators are described. Using these indicators, the authors measured the progressivity of the Quebec and Ontario tax systems for four different family situations and six levels of income. The results show that in certain situations, Quebec's tax system is more progressive while in others, the reverse is true. More specifically, Quebec's tax system is more progressive for changes in income at the lower end of the income scale while in general Ontario's system is more progressive for higher incomes. These results confirm the greater concentration of Ontario's income tax on high-income taxpayers that have previously been illustrated in the study.
This study compares the progressivity of the income taxes levied by Quebec and
Ontario. There are many reasons for a comparison between Quebec and Ontario.
First, these provinces are frequently compared. Also, since Ontario is the most
populous and wealthiest province in Canada, how its taxes on income cannot be
ignored. Furthermore, the economic structures of Quebec and Ontario are comparable,
trade between the two provinces is substantial,1 and large population pools live close
to the borders.The study is divided into two parts. The first analyzes the tax burden specific to
personal income tax in Quebec and in Ontario by comparing it with the G7 countries
and with the other provinces of Canada. The second considers ways to illustrate and
measure progressivity. After settling on the progressivity indicators, this part of the
study compares the progressivity of income tax in Quebec and in Ontario in 2002 for
four different family situations and six income levels.
In 2002-03, personal income tax was the largest source of tax revenue for
both provinces. However, at 44% of all tax revenues, its relative importance is greater in
Quebec than in Ontario where it accounted for less than 37% of all tax revenues. Table 1
also provides a comparison of the composition of the tax structure by tax source for
the years 1993-94 and 2002-03. In 1993-94, the relative share of personal income tax
was comparable in Ontario and in Quebec. That was no longer the case in 2002-03.
While the table shows that the relative importance of personal income tax declined
in Quebec and in Ontario, the drop was much more pronounced in Ontario (8.4
percentage points) than in Quebec (2.5 percentage points). |
