Articles on tax progressivity may be misleading

An article in the Globe's Report On Business - "High income earners are already paying their fair share of tax" - made me look twice. I don't usually set too much store by this particular reporter's political views, but Inm noticed that the same point was also being made by the (more typically right-wing) National Post. No surprise that they were both commenting on a report by the always right-leaning Fraser Institute, so my suspicions were raised straight away.

The Fraser Institute's report Measuring Progressivity in Canada's Tax System 2023 is designed to demonstrate that, contrary to the narrative put forward by most progressive political parties, higher income earners do actually pay their fair share of tax, and more. It seeks to rectify what the Fraser Institute calls the "common misperception in Canada that top income earners do not pay their share of taxes".

The analysis shows that the top 20% of Canadian earners make 45.7 of total income, but pay 61.9% of total income taxes paid. This compares to other lower income percentiles where the taxes paid are a smaller proportion than their share of income earned. This is portrayed in the report as evidence that, rather than paying less than their fair share, these top earners actually pay more than their fair share.

So, is the Liberal/NDP narrative wrong? Wekl, that depends on how you define "fair". The status quo is only unfair if you believe that taxes should not be progressive. Those high earners still take home hugely higher after-tax paychecks, so they can afford to contribute more to the coffers of the country so as to benefit those less blessed. That's the way things are supposed to work in a progressive democracy. But that's not what conservatives like to see.

Also, there is still a very real problem at the very top of the pile, a demographic that the Fraser Institute's choice of the top 20% conveniently disguises. A Globe and Mail article from 2022, for example, documents the tax habits of the super-rich. It concludes that over a quarter of Canadians earning more than $400,000 actually pay less than 15% in federal income taxes (plus some provincial taxes). Through a variety of aggressive tax-planning strategies (e.g. setting off business or farm losses, allowable business investment losses, charitable donations, RRSP deductions, etc) can mean that top earners actually do sometimes pay less than their "fair share".

So, a rather cynical and disingenuous publication and some equally disingenuous reporting from the right-wing of the media? Perhaps. These things are never as straightforward as they might sometimes seem.