The “rich” pay more than their share of taxes, according to a Montreal Economic Institute study
Montreal, November 19, 2010 – In an Economic Note published today by the Montreal Economic Institute (MEI), Germain Belzile and Michel Kelly-Gagnon compare the tax burdens of different Quebec taxpayers according to their income. With the assistance of a tax specialist from Samson Bélair/Deloitte & Touche, they conclude that not only do "the rich" not escape from paying taxes, their tax contribution is substantially greater than their share of income, contrary to popular belief.
With a salary of $50,000 a year, a family with two children pays 28% of its income in taxes, taking into account government benefits received, sales taxes, municipal and school taxes and contributions to various social assistance programs. For a doctor whose gross business income is $275,000, the proportion of income paid in taxes climbs to 39%. For a taxpayer occupying a key position in a large corporation and earning $1,000,000 a year, the rate hits 48%, even with the help of advanced tax planning.
"The tax burden is significant for the middle class and is even heavier for high-income families, even with the advice of a tax specialist. Wealthier taxpayers pay more taxes not only in absolute terms, but also as a proportion of their income," explains Germain Belzile.
As a group, taxpayers earning over $100,000 a year generate 19% of all income but pay 31% of taxes. Indeed, only 0.8% of them paid no Quebec income taxes. These people could be employed by an international organization or have received an inheritance, for example. According to Mr. Belzile, they are the exception, not the rule.
"Whether we examine the details of high-income taxpayers in certain situations or look at the overall picture, it is simply false to claim that ‘the rich’ do not pay taxes," concludes Mr. Kelly-Gagnon. "Furthermore, a quick calculation shows that if we had wanted to pay off this year’s Quebec deficit by ‘taxing the rich’ who earn over $250,000 a year, their marginal income tax rate would have had to be around 100%, including the federal government’s income tax. Given high-income earners’ already heavy tax burden, it seems evident that a return to a balanced budget ought to be done through spending cuts. Indeed, this approach is favoured by a majority of Quebecers."
The Economic Note entitled Do the "rich" pay their fair share of taxes?, prepared by Germain Belzile and Michel Kelly-Gagnon, respectively Director of Research and President and CEO of the Montreal Economic Institute (MEI), can be consulted free of charge on the Institute’s website.
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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its publications, its media interventions and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms. It does not accept any government funding.
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