A Canadian's random thoughts on personal finance

Mar 30, 2008

Income tax rant

I recently heard on the radio a proposal to simplify Canada's tax system. The claim was that four tax brackets are too many, and instead, we should have only two. I couldn't help but laugh.

As a resident of Ontario, we have federal tax, provincial tax (with different brackets), the provincial surtax, CPP and EI contributions, and the health premium. Combining all these taxes into one "effective tax schedule" results in 23 different tax brackets, ranging from 1.8% to over 71%. (A retiree receiving the OAS and GIS, with the associated claw-backs, has even higher and weirder tax brackets.)

I'd like to see just three things:
  • The provincial and federal brackets should align with each other.
  • The so-called "health premium" and the provincial surtax should both become plain old tax hikes.
  • CPP and EI contribution limit should be aligned with the other tax brackets (and the amount paid should be averaged throughout the year).
Just doing these relatively minor things would return us to four tax brackets instead of 23. We wouldn't be paying any less tax, but those of us trying to plan our taxes would be doing a lot less head-scratching.

PS. In case you're wondering, here are the brackets:

0.00-3500.00 @1.8%
3500.00-11262.90 @6.75%
11262.90-11638.90 @12.8%
11638.90-20000.00 @28.3%
20000.00-25000.00 @34.3%
25000.00-35488.00 @28.3%
35488.00-36000.00 @31.4%
36000.00-37178.00 @37.4%
37178.00-38500.00 @43.9%
38500.00-40000.00 @37.9%
40000.00-43700.00 @36.1%
43700.00-48000.00 @31.15%
48000.00-48600.00 @56.15%
48600.00-64274.89 @31.15%
64274.89-70976.00 @32.98%
70976.00-72000.00 @35.392%
72000.00-72600.00 @60.392%
72600.00-74357.00 @35.392%
74357.00-75088.90 @39.392%
75088.90-120887.00 @43.4096%
120887.00-200000.00 @46.4096%
200000.00-200600.00 @71.4096%
200600.00 and up @46.4096%

1 comment:

George said...

Thanks it was helpful