MMU Monetary Economics Tax System & Policy Taxation of High Incomes Worksheet

  

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Tax System & Policy
James Stutely
Department of Economics, McMaster University
Taxes & Transfers Matter
A Major Policy Lever
• They shape the income distribution
• Who pays?
• Who receives?
• Redistribution
• The effect economic activity
• Saving; labour supply; investment; consumption ….
• Difficult research topic
• Tax affects behaviour in short- and long-run
• And often people face an amalgam of various taxes (and therefore distortions)
• The optimal design: how to maximize well-being?
Tax & Government Revenue
• Compulsory payments to gov. treasury to finance public services
• And benefit taxes applied to specific purposes
• Not the only source of government revenue
• Grants & foreign aid, investment income, voluntary transfers to state, + More
• In most Western countries, rising trend in ratio of Taxes to GDP
• Growing social welfare costs
• Aging populations
Revenue and Taxes, 2019 Q1
$1,000,000’s
300,000
250,000
200,000
150,000
100,000
50,000
0
Consolidated
Federal
Revenue
Taxes
Aggregate tax burden
• Aggregate tax burden
• You have seen before that domestic taxes, in one way or another, born by residents
• Incidence of taxation
• Tax burden as proportion of GDP
• International comparison
• Generally, nations with large social support systems have a high ratio
• But in some cases differences reflect national choices
• TAX/GDP does not paint a clear picture
• Consider two countries:
• i pays for health, welfare, pensions, etc., through government; imposes taxes to cover
• j asks residents to pay the costs through private means; lower taxes
• Residents of j have more flexibility in the “purchase” of public goods
• Plus, distribution of public good provision likely varies substantially over income distribution
Income Tax share of GDP
Select OECD Countries
14
12
10
8
6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Australia
Canada
France
Germany
Japan
OECD – Average
United Kingdom
United States
Some Questions: what matters (inter alia)
• How should government allocate tax to support expenditure?
• Tax burden or the incidence of taxation
• How to spread the burden?
• Fiscal effects of Tax Policy: Mechanical and Behavioural effects
• Short- and long-term effects
• Effects ones economic choices – distorts their budget set
• Adjustment costs
• Really brings into to focus the role of government – what is it?
Sources of Tax Revenue Matter
• Income Tax; Corporate Tax; Consumption Tax; Payroll Tax + More
• Canada relies most heavily on income tax
• Individuals incomes
• Taxable earnings; income from savings; dividends; capital gains
• Second most important is consumption tax
• Provincial sales tax, HST, and Goods and Service Tax, GST
Tax Revenue by Source, Q1 2019
$1,000,000’s
120,000
100,000
80,000
60,000
40,000
20,000
0
Income tax
Consumption tax
Social contributions
Consolidated
Federal
Other tax
Revenues and Expenses as a percentage of GDP
2018
25
20
15
10
5
0
Federal
Provincial-Territorial
Revenue
Expense
Local
Ability to pay and tax progressivity Matters
Income Taxes
• Taxes and Transfers shape the income distribution
• Federal, Canada 2017
•
•
•
•
•
15.0% on the first $45,916 of taxable income;
20.5% on taxable income between $45,916 and $91,831;
26.0% on taxable income between $91,831 and $142,353;
29.0% on taxable income between $142,353 and $202,800; and
33.0% on taxable income exceeding $202,800.
• US schedule (2018)
•
•
•
•
•
•
•
10% on first $9,525
12% on $9,525 to $38,700
22% on 38,700 to $82,500
24% on $82,500 to $157,500
32% on 157,500 to $200,000
35% on 200,001 to $500,000
37% on $500,001 +
Income Tax Rates (2017 Tax Year)
• Federal, Canada
•
•
•
•
•
15.0% on the first $45,916 of taxable income;
20.5% on taxable income between $45,916 and $91,831;
26.0% on taxable income between $91,831 and $142,353;
29.0% on taxable income between $142,353 and $202,800; and
33.0% on taxable income exceeding $202,800.
• US schedule (2018)
•
•
•
•
•
•
•
10% on first $9,525
12% on $9,525 to $38,700
22% on 38,700 to $82,500
24% on $82,500 to $157,500
32% on 157,500 to $200,000
35% on 200,001 to $500,000
37% on $500,001 +
Income Inequality
• Progressivity tends to reduce income inequality
• In after-tax terms
• Tax funded social benefits and transfers also reduce income inequality
• If we did not have progressive income taxation, the tax system would be
regressive
• Low-income individuals paying high clawback taxes on transfers
• A typical measure of income inequality: Gini Coefficient
• 0 means that income distribution is perfectly equal
• 1 means that richest individual has all the income – perfectly unequal
Gini Coefficient
0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Adjusted market income
Adjusted total income
Adjusted after-tax income
Efficiency Costs of Raising Tax Revenues
Matters
• Amount of taxes paid over and above the amount of tax collected
• i.e., the mechanical revenue effect of tax
• Loss in the size of the “economic pie”
• Might have heard of this as deadweight cost
• A loss of economic transactions due to behavioural responses to taxes
• Later we will talk about the elasticity of taxable income, ETI
• Tax Wedge
• Ratio between amount of taxes paid and total labour cost for employer
• Measure extent to which tax on labour discourages employment
Tax Wedge
40
35
30
25
20
15
10
5
0
Canada
OECD – Average
United States
Behavioural responses
• Elasticity of taxable income (ETI)
• % Change in taxable income compared to the % change in net-of-tax rate
• Not just a shifting of labour income
• Government wants to reduce “leakage” or “leaky” tax system
• Mobility elasticities
• Moving “taxation” region, different than region of residence
Some topics we will discuss
• Should we tax income or something else?
• Some say a consumption tax is better
• But, could be seen as regressive
• Should we tax the rich more?
• Could be a problem in a leaky tax system
• Some other issues, want an optimal tax system
• You don’t want to distort incentives too much
Tax System & Policy
James Stutely
Department of Economics, McMaster University
Taxing high-incomes
• We’ve been talking about high-incomes, top 1%
• We talked about the ETRs on the Top 1%
• What should the government do?
• It’s going to depend on the optimal tax rate
What is the optimal tax rate?
• We’re going to derive some formulas for it
• And then we’ll parameterize it using some STC data
• But we will need to know first about the revenue effects of top tax
rates
• Mechanical effect & Behavioural effect
Standard static model of labour supply
• Individuals maximize some utility function 𝑢(𝑐, 𝑙)
• c is disposable income, or consumption in a static model
• l is labour supply, hours of work in this case
• Individuals earn 𝑤 ⋅ 𝑙 where w is an exogenous wage rate
• Subject to a budget constraint
• 𝑐 = 𝑤 ⋅ 𝑙 ⋅ (1 − 𝜏) + 𝐸
• 𝜏 is the marginal tax rate
• E is virtual income
Static model (2)
• Recent innovations in this literature point to behaviour along other margins
• Not just l
• Effort, career choice, tax avoidance and tax evasion
• So now elasticity of taxable income depends on reported income
• Utility depends positively on consumption c
• And negatively on reported income, z
• Because of effort costs associated with generating income
• Individuals thus solve 𝑚𝑎𝑥𝑐,𝑧 𝑢(𝑐, 𝑧): 𝑐 = (1 − 𝜏) ⋅ 𝑧 + 𝐸
• Which yields 𝑧(1 − 𝜏, 𝐸)
• Says that z depends on the net-of-marginal-tax rate and income from tax/transfers
• Typically, literature assumes away income effects
• That is, z() does not depend on E
The ETI
• The formula: 𝑒 =
1−𝜏
𝑧
â‹…
𝜕𝑧
𝜕(1−𝜏)
• % change in reported income when net-of-tax rate increases by 1%
• But we are going to focus on the top-end of the income distribution
• Indeed, most empirical studies find responses concentrated at the top end
• Notation:
•
•
•
•
𝑧, top end reported income threshold
𝜏 top bracket tax rate; assume they face a constant marginal tax rate
N individuals in the top income tax bracket
𝑧 𝑚 (1 − 𝜏), average income reported by the top N
Perturbation argument
• Aggregate ETI at the top 𝑒 =
(1−𝜏)
𝜕𝑧 𝑚
â‹…
𝑚
𝑧
𝜕(1−𝜏)
• Government increases 𝜏 by a small amount, d𝜏
• With no change in marginal tax rates below 𝑧
Predicted effects of tax reform
• The mechanical effect, 𝑑𝑀 = 𝑁 ⋅ (𝑧 𝑚 − 𝑧) ⋅ 𝑑𝜏 > 0
• Increase in tax revenues due to increased tax on incomes above 𝑧
• The behavioural response
𝑑𝜏
• Top N reduce z by 𝑑𝑧 𝑚 = −𝑒 ⋅ 𝑧 𝑚 ⋅ 1−𝜏
• And this changes tax revenues by 𝜏𝑑𝑧 𝑚
𝜏
• So the behavioural response is 𝑑𝐵 =− 𝑁 ⋅ 𝑒 ⋅ 𝑧 𝑚 ⋅ 1−𝜏 ⋅ 𝑑𝜏 < 0 • Total change in tax revenue 𝑑𝑅 = 𝑑𝑀 + 𝑑𝐵 = 𝑁 ⋅ (𝑧 𝑚 − 𝑧) ⋅ 1 − 𝑒 ⋅ 𝑧𝑚 𝑧 𝑚 −𝑧 ⋅ 𝜏 1−𝜏 ⋅ 𝑑𝜏 Pareto distribution • A key parameter is 𝑎 = 𝑧𝑚 𝑧 𝑚 −𝑧 • 𝑎≥1 • If a = 1 there is single flat tax applied to all incomes • Typical assumption is that top tail is Pareto distributed • That is has density function of 𝑓(𝑧) = ∞ • In this case • Hence 𝑧𝑚 𝑧𝑚 𝑧 𝑚 −𝑧 = =𝛼 ‫𝑧𝑑⋅)𝑧(𝑓⋅𝑧 𝑧׬‬ ∞ ‫𝑧𝑑⋅)𝑧(𝑓 𝑧׬‬ =𝑧⋅ 𝐶 𝑧 1+𝛼 𝛼 𝛼−1 Pareto distribution (2) • If top-tail is Pareto distributed, then a does not vary with 𝑧 • And 𝑎 = 𝛼 • a is a measure of the thinness of the top tail • A thicker tail means 𝑧 𝑚 is large relative to 𝑧 (a small a) The Marginal Cost of Public Funds • Using a, the change in tax revenue is 𝑑𝑅 = 𝑑𝑀 ⋅ 1 − 𝜏 1−𝜏 ⋅𝑒⋅𝑎 • This equation is of importance to economic welfare analysis because 𝜏⋅𝑒⋅𝑎 of 1−𝜏 • 𝜏⋅𝑒⋅𝑎 1−𝜏 is the marginal deadweight cost from a tax rate increase Marginal Cost of Public Funds (2) • The behavioural response creates no utility loss to individuals • The only loss arises from the mechanical effect of 𝑑𝜏 • Tax revenue collected is 𝑑𝑅 = 𝑑𝑀 + 𝑑𝐵 < 𝑑𝑀 • So –dB is the lost utility over and above tax revenue collected • MECF is −𝑑𝐵 𝑑𝑅 = 𝜏⋅𝑒⋅𝑎 1−𝜏−𝜏⋅𝑒⋅𝑎 • In words, for each extra dollar of tax revenue, the government imposes an extra cost −𝑑𝐵 of > 0 on taxpayers
𝑑𝑅
So what is the optimal tax rate?
• Find a revenue-maximizing rate of 𝜏 ∗
• A rate such that 1 −
• You’ll see that
• Intuition:
𝜏∗
=
𝜏
1−𝜏
⋅𝑒⋅𝑎 =0
1
1+𝑎⋅𝑒
• A top tax rate above 𝜏 ∗ is inefficient because a decrease would increase the marginal
utility of affected taxpayers (incomes above 𝑧)
• And increase tax revenue, which would also benefit other taxpayers through
redistribution effects
Using some publicly available data
• We have what we need from the two data sets we’ve been working
with
• What is a in 2018?
• it’s 496,200/(496,200 – 244,800) = 1.97
Income distribution in 2018
0.3
0.25
0.2
0.15
0.1
0.05
0
Bottom 5 percent
Percentile 21 to 25
Percentile 51 to 55
Percentile 71 to 75
Top 5 percent income
Optimal tax rate under various scenarios
a:
ETI:
1.4
1.5
1.6
1.7
1.8
1.9
2
0.1
0.877193
0.869565
0.862069
0.854701
0.847458
0.840336 0.833333
0.25
0.740741
0.727273
0.714286
0.701754
0.689655
0.677966 0.666667
0.5
0.588235
0.571429
0.555556
0.540541
0.526316
0.512821
0.5
0.75
0.487805
0.470588
0.454545
0.43956
0.425532
0.412371
0.4
Optimal top-bracket marginal tax rate
Optimal Tax Rate
1
0.8
0.6
0.4
0.2
0
1.4
1.5
1.6
1.7
1.8
Assumed ETI:
0.1
0.25
0.5
0.75
1.9
2
Key lesson:
• As a gets bigger, less gain from taxing high incomes
• Distribution more equitable
• As e gets bigger, large deadweight cost from taxing high incomes
Let’s say you put a special top marginal tax
rate on the top 1% ….
• Federal tax rate, but later we could think about interprovincial
differences.
• Federal Marginal Tax Brackets, in 2020:
•
•
•
•
•
15% on the first $48,535 of taxable income, and
20.5% on the portion of taxable income over $48,535 up to $97,069 and
26% on the portion of taxable income over $97,069 up to $150,473 and
29% on the portion of taxable income over $150,473 up to $214,368 and
33% of taxable income over $214,368
New Fictitious Tax Bracket…
• Current top tax bracket
• 33% of taxable income over $214,368
• Let’s assume
•
•
•
•
•
38% of taxable income over 𝑧 (the 2018 value)
𝑧 in 2018 is $244,800
𝑑𝜏 is 5%
N is 283,015
𝑧 𝑚 is $496,200
Marginal cost of Public funds
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0.1
0.2
0.3
Elasticity of Taxable Income
0.4
0.5
Marginal cost of Public funds
35
30
25
20
15
10
5
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Revenue Effect ($) per Taxfiler, 2018
5% increase in top MTR for top 1%
120
100
80
60
40
20
0
0.1
0.2
0.3
0.4
0.5
0.6
Elasticity of Taxable Income
0.7
0.8
0.9
1
Economic Issues 2D03
Tax System and Tax Policy: Taxation of High Incomes (A5)
macID:
Student number:
1) Background:
In this section, draw on Statistics Canada’s public tables to cover the following:
Who are the top 1%?
•
•
•
Top income cut-off, average income, share of income from labour & how much tax they pay
Sex and age
Province/Location
Compared to the bottom 50th percentile of tax filers, how has the income share and effective tax rate of
the top 1% evolved over the data period?
By province, how has the income share and effective tax rate of the province-specific top 1% evolved
over time?
2) Policy evaluation.
Consider the following proposal to increase the top marginal tax rate on the top (province-specific) 1%:
Base Tax System, 2020
Top MTR
MTR (%)
threshold ($)
189,604
18.3
63,969
16.7
150,000
21
160,776
20.3
220,000
13.16
72,164
17.4
129,214
14.5
314,928
15
157,747
16.8
214,368
33
NFLD
PEI
NS
NB
ON
MB
SK
AB
BC
Federal
Fictitious System, +5
Top 1% MTR
MTR (%)
threshold ($)
210,200
23.3
172,400
21.7
191,900
26
175,000
25.3
260,600
18.16
202,600
22.4
209,800
19.5
297,900
20
244,800
21.8
244,800
33
Cover the following issues (by province) with this proposal (Assume a constant ETI of 0.664):
•
What is the net revenue effect (by province) of this proposal? Comment on any noticeable
provincial differences.
o
o
o
•
•
How much of the mechanical revenue gain disappears because of a behavioural effect?
What are the revenue and mechanical effects per tax filer?
Why is the elasticity of taxable income important?
What might explain these differences
o Think about skewness & revenue gain share of the mechanical effect
What is the marginal cost of public funds?
•
•
•
Explain and calculate the optimal province-specific top 1% marginal tax rate. How far off is it
from the fictitious +5 marginal tax rate?
Assuming no income shifting, what is the size of the vertical fiscal externality?
What are the progressivity implications of this proposal?
Taxing high incomes
Is it a good idea?
James Maxwell Stutely
Department of Economics, McMaster University
Longitudinal Administrative Database
• We are going to look at selected data from the LAD
• The LAD is a big administrative tax record data base
• Microdata – well, we are seeing a highly aggregate version
• It’s a panel
We will use this data in subsequent videos to
• Look at changes in province-specific high income shares associated
with changes in EMTRs
• Look at the behavioural elasticities of high income earners to changes
in the EMTR
• Look at revenue consequences of taxing high incomes
Who are the top income earners
• Drawing on somewhat recent Canadian research on this
• https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3546376/ , Mike Veall
• https://www150.statcan.gc.ca/n1/pub/11-630-x/11-630-x2016009-eng.htm, STC
•
•
•
•
These guys are also using LAD tax filer data
But they have the microdata, so much better quality
Key word to focus on is “Surge”
And a lot of guys find it only happens in a couple of provinces
• Those with smaller top MTRs, of course.
• Looking at the top 1%, 0.1% & 0.01% of incomes in Canada
• Top 1% 2017 threshold: $236,000 total income before tax
• Top 0.1% 2017 threshold: $740,300, total income before tax
• Top 0.01% 2017 threshold: $2,705,800, total income before tax
Who are the top income earners (2)
• Top 1 percent comprises 10 percent of total income share
• They also pay a lot of income taxes
• Top 10 percent pays 50 percent of all federal + provincial income tax
• Persistence in place on income distribution
• 70 percent of top 1 percent in same quartile (99th percentile) last year
• 50 percent in same quartile five years before
• Over half of total income from wages + salary – but around 70% for all Taxfilers.
• Capital gains income might before important in this context- look at the data
0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Income Thresholds, Current dollars
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
top 0.01
top 0.1
top 1
Income Thresholds, Current dollars
250000
200000
150000
100000
50000
0
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
top 1
top 5
top 10
Trends in High Incomes
• We should first convert to constant dollars using the CPI
• Remember: Multiply current dollar by (index in base year / index in current
year)
• Use Statistics Canada’s annual CPI
• https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000501
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Income Threshold, Constant Dollars
top 0.01
top 0.1
top 1
0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Income Threshold, 2017 constant dollars
300000
250000
200000
150000
100000
50000
top 1
top 5
top 10
0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Total Income Share

40
35
30
25
20
15
10
5
top 1
top 5
top 10
0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
And they pay a lot of income taxes
Share of all Income Tax Paid
0.6
0.5
0.4
0.3
0.2
0.1
top 0.1
top 1
top 5
top 10
80
70
60
50
40
30
20
10
0
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Persistence of high incomes
Percentage in same quartile last year
top 0.01
top 0.1
top 1
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Percentange in same quartile 5 years before
60
50
40
30
20
10
0
top 0.01
top 0.1
top 1
50
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Share of income that is from wage & salary
80
75
70
65
60
55
top 0.01
top 0.1
top 1
top 5
top 10
All taxfilers
Tax System & Policy
effective tax rates
Changes to top MTRs
• From the aggregated data-set we’re looking at, ETRs
• Effective tax rates: ratio of income taxes paid to total (before-tax)
income
• In other words, percentage of total income spent on income taxes
• So we will have to make due
• Changes in ETRs might reflect changes in top MTRs for 1 percenters
As of late (in 2018):
Effective Tax Rates
• Tax filers spent an average of 11.8% of total income on income taxes
• Including payroll taxes and social contributions
• EI premiums; CPP contributions
• 0.1 percentage points higher than it was in 2017
• The 0.1 percentage point increase mainly due to changes in federal
effective income tax rate, 2017 to 2018
• No change in effective fed payroll tax rate & provincial (overall) effective
income tax rates
Effective Tax Rates,
All tax-filers, 2018
7
6
5
4
3
2
1
0
Canada
NFLD
PEI
NS
Fed Income Tax
NB
QC
ON
Prov Income Tax
MAN
SAS
Fed Payroll tax
ALB
BC
Effective Tax Rates
Top 1%, 2018
25
20
15
10
5
0
Canada
NFLD
PEI
NS
Fed Income Tax
NB
QC
ON
Prov Income Tax
MAN
SAS
Fed Payroll tax
ALB
BC
Provincial comparison
• Slight decreases in effective income tax rates in parts of the Atlantic
• 0.2 percentage points in Nova Scotia
• 0.1 percentage points in both Newfoundland & Prince Edward Island
• Also in Saskatchewan
• No change in effective income tax rate in Alberta & BC
• A 0.1 percentage point increase in effective income tax rate in
remaining provinces/territories
For whom?
• Effective tax rates grew fastest for the Top 1%
• Overall effective tax rate for 1% grew by 0.7 percentage points
• 31.0% in 2017 and 31.7% in 2018
• Both Fed. & Prov. Income taxes were contributors to the increase
• The 0.7 percentage point increase:
• 0.4 from rise in prov/terr effective income tax rates
• 0.3 from rise in fed effective income tax rates
Percentage change in Effective Income Tax Rate
2017 to 2018
0.08
0.06
0.04
0.02
0
-0.02
Canada
NFLD
PEI
NS
NB
QC
ON
-0.04
-0.06
-0.08
-0.1
Top 1%
All Tax-filers
MAN
SAS
ALB
BC
Some other potentially important trends in high
incomes
(Recent first, & then over the past decade or two)
• Mean income grows for Top 1%
• Total income (constant) grew by 1.5%
• Mean income grows for bottom 50%
• Total income grew by 1.7%
• Mean income flat for upper-middle of income distribution
• Flat at $59,400, 2017 – 2018
Percentage Change in Mean Total Income
2018 Constant dollars, 2017 to 2018
0.02
0.015
0.01
0.005
0
All
Men
Women
-0.005
Top 1%
Bottom 50
Upper-Middle
Income shares
• Top 1%: income share grew by 0.1 percentage points
• 10% of Canada’s total income
• But declining trend; peak in 2006 of 12.1%
• Bottom 50%: income share grew by 0.2 percentage points
• 18% of Canada’s total income
• Upper-middle: income share decreased by 0.2 percentage points
• ~48% of total income
Percentage change in share of total income distribution
2017 to 2018
0.014
0.012
0.01
0.008
0.006
0.004
0.002
0
-0.002
-0.004
-0.006
Top 1%
Bottom 50
Upper-Middle
Share of Total Income Distribution
2018
60
50
40
30
20
10
0
All
Men
Top 1%
Bottom 50
Women
Upper-Middle
Income shares, by province
• Count of Top 1% grew in all provinces except Alberta
• Fell by almost 3,000 from 2017 to 2018
• Alberta used to have the majority of the Top 1%
• Decreasing steadily since 2014
• Oil price falling
Percentage Distribution of Top 1%
50
45
40
35
30
25
20
15
10
5
0
NFLD
NS
NB
QC
ON
2017
2018
MAN
SAS
ALB
BC
Can it be reconciled with changes in effective
tax rates over time?

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