The Rich Pay Their Fair Share Of Taxes So Carney Needs To Look Elsewhere To Raise Money

I’m a fun guy to go out for dinner with; just ask my wife or our friends. Before long, I’ll steer the conversation toward tax policy. I know, I know, I’m a blast at parties.

A common topic is how much the so-called rich actually pay in income tax . The reaction is almost always the same when I share the statistics: genuine surprise. Why? Because many people assume wealthy Canadians pay little tax thanks to endless loopholes and rate preferences. They simply aren’t contributing their fair share.

But the data doesn’t support that shallow narrative.

The top 20 per cent of income-earning families pay 65.3 per cent of all personal income taxes in Canada and 58.3 per cent of all taxes once you add sales, property and every other levy governments collect, according to the Fraser Institute’s annual study on tax progressivity. The bottom 20 per cent pay 0.7 per cent of personal income taxes and 1.7 per cent of total taxes.

Statistics Canada’s effective tax rate data tell a similar story. The top one per cent of income earners in 2023 reported 10.1 per cent of total income, but paid 22.1 per cent of federal and provincial income taxes. The top 0.01 per cent — roughly 3,000 people — reported 1.1 per cent of total income, but paid three per cent of total taxes.

The bottom 50 per cent paid five per cent of total taxes, clear evidence that redistribution is a central pillar of Canadian tax policy.

Consumption taxes have a similar narrative.

The highest-income quintile spent, on average, $123,447 on goods and services in 2023, more than triple the $40,080 spent by the lowest quintile, according to Statistics Canada’s Survey of Household Spending . GST and HST apply to most consumer purchases, and the exemptions — basic groceries, most financial services, resale housing — apply the same way regardless of income. The wealthy are paying substantially more consumption taxes simply because they buy more.

Then there are taxes aimed almost exclusively at higher-income Canadians. The federal luxury tax , introduced in 2022 on certain boats, aircraft and automobiles, was partly repealed in the last budget after the government acknowledged it was inefficient, costly to administer and harmful to Canadian industries. The same reasoning applies to automobiles, and the tax should be repealed entirely.

And let’s not forget what happens when someone leaves the country. Canada imposes a departure tax, so individuals who cease Canadian residency are generally deemed to dispose of their assets at fair market value immediately before departure, triggering tax on accrued gains subject to certain exceptions and deferrals. Similar rules apply at death.

The above evidence settles one debate: Canada’s highest-income earners already shoulder a disproportionate share of the tax burden. The more important question is what happens when governments continue trying to extract even more revenue from a relatively small group of taxpayers.

The evidence on targeting the rich for more is well documented : the United Kingdom hiked its top rate to 50 per cent in 2010 and it was projected to raise 2.5 billion pounds; it raised, at most, one billion pounds. The same happened in Canada in 2016 when the Justin Trudeau government increased the top personal tax rate by four percentage points. The instinct to vilify success rather than celebrate it reflects the same short-sightedness.

None of this happens in a vacuum. Emigration from Canada reached a 10-year high in 2024, and the elevated pace continued into 2025. Not everyone who leaves is wealthy, but when successful entrepreneurs, investors and highly paid professionals go, they take investment capital, business activity, expertise and years of future tax revenue with them.

Chase away the geese and you stop getting golden eggs.

What are some of the solutions? The Royal Commission on Taxation, led by Kenneth Carter, in 1966 recommended the top marginal rate should never exceed 50 per cent, saying that anything higher becomes a pure disincentive to work, invest and build.

That warning has aged well. Canada’s combined federal-provincial top rate today reaches as high as 54.8 per cent in Newfoundland, with seven other provinces also above 50 per cent.

But Carter also wanted full taxation of capital gains on the theory that a buck is a buck is a buck regardless of how it was earned. In 1969, then finance minister Edgar Benson, steering the government’s response to the commission’s report through fierce backlash, rightly rejected that piece of Carter’s vision.

The 50 per cent capital gains inclusion rate that emerged from that fight, which has survived largely intact for more than 50 years, reflects something Carter gave short shrift to: how a dollar is earned matters. Risk matters and policies that reward it grow the pie.

The reform worth pursuing borrows from both men: take Carter’s rate discipline — a hard ceiling on the marginal rate, genuinely enforced through federal-provincial coordination and no higher than, say, 45 per cent — while keeping Benson’s recognition that capital deserves different treatment than labour income.

Then add full elimination of the luxury tax, meaningful deferral relief for capital gains triggered for businesses and during a person’s lifetime to encourage reinvestment and an end to taxing the rich as a substitute for spending discipline.

The question was never whether the rich pay enough since the data answered that years ago. The real question is whether Canada wants to keep the people who pay it.

The next time you invite me to dinner and the conversation drifts toward taxes, I won’t need to convince you the rich are already paying more than their fair share. The numbers did that work for me.

The only question left on the table is whether we keep squeezing the golden goose until it finally flies south for good.

Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.

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