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October 28, 2024HIGH INCOME TRENDS AND EFFECTIVE TAX RATES, 2022 Statistics Canada has released the latest data for high income earners as well as effective income tax (Federal income, Provincial income, Federal payroll) and cash transfer rates (Federal and Provincial cash transfers). The latest data are from the 2022 taxation year.
High income earners
The threshold for the top 1 per cent of tax filers varies from Province to Province and from City to City. In Canada, those reporting total income (including capital gains) over $322,000 in 2022 represented the top 1 per cent of taxfilers.
In Nova Scotia, there are fewer individuals with higher incomes and the threshold of the top 1 per cent was $250,400. In Halifax, the threshold of the top 1 per cent of earners was $290,500.
The top 5% of Canadian taxfilers had total income (including capital gains) of $153,900. In Nova Scotia, the top 5% of taxfilers had income of at least $127,300. Halifax's top 5% of taxfilers had incomes of at least $142,800.
The top 10% of taxfilers in Canada had total income (including capital gains) of $115,000. For Nova Scotia, the top 10% of taxfilers had income of $98,100 or more; for Halifax the top 10% of taxfilers had income of $108,700.
The upper threshold of income for the bottom 50% of taxfilers was $43,100 in Canada. It was $38,900 in Nova Scotia and $44,400 in Halifax.
In Nova Scotia, the top 1% of earners reported 9.9% of the income and paid 17.4% of the income taxes. The top 1% of earners in Canada reported 12.6% of the total income (including capital gains) in 2022 and paid 22.7% of Federal and Provincial income taxes.
The 95th to 99th percentiles of Nova Scotia taxfilers reported 12.7% of the total income and paid 19.0% of the income taxes.
The 90th to 95th percentile of Nova Scotia taxfilers reported 10.7% of the total income and paid 13.6% of the income taxes.
The 50th to 90th percentiles of Nova Scotia taxfilers reported 47.6% of total income, but paid 44.6% of the income taxes.
The bottom 50% of Nova Scotia taxfilers reported 19.1% of the income and paid just 5.4% of the income taxes.
The average income of those among the top 1% of earners in Nova Scotia was $513,700 in total income (including capital gains), while their average income tax was $156,800 (Federal and Provincial).
The average income of those among the top 5% of earners in Nova Scotia was $234,900 in total income, while their average income tax was $65,700.
The average income of those among the top 10% of earners in Nova Scotia was $172,600 in total income, while their average income tax was $45,200.
The average income of those among the top 50% of earners in Nova Scotia was $83,900 in total income, while their average income tax was $17,100.
The average income of those among the bottom 50% of earners in Nova Scotia was $19,800 in total income, while their average income tax was $980.
Over the period 1982-2022, the share of income accruing to the highest earners (top 1%, 95-99th percentile) has risen, though the portion of Federal and Provincial income taxes paid by these groups has risen even faster. Income shares for the top 1% of earners were notably higher in 2021 and fell in 2022 (though not back to pre-pandemic levels).
The share of income earned by those in the 95-99th percentiles rose in Nova Scotia in 2022, but was flat for this income cohort across Canada as a whole.
Before 2021, the share of incomes for those in the 90th to 95th percentiles was declining. However, this reversed in 2021 and 2022.
The share of incomes for the 50-90th percentiles has declined over the 2016-2021 period, but rebounded in 2022.
In Nova Scotia, the share of income earned by the bottom 50% of taxfilers has risen over the last 20 years, before growing sharply in 2020 with the extraordinary government transfer income. The share of incomes earned by those at the bottom 50% of the income distribution has fallen in each of the last two years, returning to pre-pandemic levels.
Note: Total income consists of income from earnings, investments, pensions, spousal support payments and other taxable income plus government transfers and refundable tax credits. Federal Income taxes are derived from line 420 of the federal income tax return and exclude the Quebec abatement.
Effective tax and transfer rates
Statistics Canada's review of income trends also provides effective tax rates and transfer rates.
Effective tax rates measure the sum of Federal income tax, Provincial income tax and Federal payroll taxes as a share of modified total income.
Effective transfer rates measure the sum of Federal cash transfers plus Provincial cash transfers as a share of modified total income.
In the analysis below, those that report taxes in excess of transfers pay a positive net tax rate while those whose transfers exceed their taxes report a negative net tax rate.
Across Canada, the effective tax rate was 20.1% in 2022. Nova Scotia's effective tax rate was just above this at 20.5%. The highest effective tax rates were reported in Québec (just ahead of Nova Scotia and Ontario) while the lowest effective tax rate was reported in Saskatchewan.
Transfer rates were highest in Newfoundland and Labrador and Labrador while the lowest rate of transfers was reported in Alberta. Nova Scotia's transfer rate was 15.9% of modified total income while the national average was 12.6%.
Nova Scotia's net effective rate (taxes less transfers) was a net tax of 4.6% of total income. Nationally, the net effective tax rate was 7.4%. All provinces reported positive net tax rates (taxes>transfers) with the lowest values in Newfoundland and Labrador and New Brunswick. Alberta and Ontario reported the highest net tax rates.
Canada's system of taxes and transfers make different provisions for certain family types and age cohorts. Tax rates were higher for non-elderly couple families and non-elderly persons not in a census family. There were lower effective tax rates for lone-parent families and elderly persons (whether in couples or not in census families).
Transfers were notably higher for elderly persons (reflecting public pension systems) as well as for lone-parent families. Couple parents and non-elderly persons without children (whether in couples or not in a census family) received much lower transfers as a share of income.
With higher transfer rates and lower tax rates, transfers exceeded taxes for the elderly as well as for lone parents. The highest net taxes were paid by non-elderly couples without children.
Source: Statistics Canada. Table 11-10-0054-01 Federal and provincial individual effective tax rates; Table 11-10-0056-01 High income tax filers in Canada, specific geographic area thresholds
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