Top-End Progressivity and Federal Tax Preferences in Canada: Estimates from Personal Income Tax Data

Posted: 19 Nov 2015

See all articles by Brian B. Murphy

Brian B. Murphy

Statistics Canada

Michael R. Veall

McMaster University - Department of Economics; Institute for the Study of Labor (IZA)

Michael C. Wolfson

EvidenceNetwork.ca; University of Ottawa

Date Written: November 18, 2015

Abstract

This article presents a first step toward consideration of how tax preferences may affect the progressivity of the Canadian federal personal income tax system at the top end. The authors consider 60 tax expenditures listed by the Department of Finance and use tax filer data to attribute the shares to the top 1 percent, top 0.1 percent, and top 0.01 percent of income recipients. The Department of Finance estimates are made under the assumption of no behavioral change. The authors relax this slightly by assuming that behavioral change does not vary by income group. They define a tax preference as top-end progressive if the share of the preference's benefits received by top income recipients is less than their income share. Most tax expenditures are estimated to be top-end progressive except, as expected, those involving capital income and stock options. Similar findings hold for an alternative definition of top-end progressive based on tax payments. The results are consistent with those for the United States by Nguyen, Nunns, Toder, and Williams (2012) and Brown, Gale, and Looney (2012).

Keywords: Tax expenditures, income distribution, tax deductions, income tax credits, progressivity, income inequality

Suggested Citation

Murphy, Brian B. and Veall, Michael R. and Wolfson, Michael C., Top-End Progressivity and Federal Tax Preferences in Canada: Estimates from Personal Income Tax Data (November 18, 2015). Canadian Tax Journal/Revue Fiscale Canadienne, Vol. 63, No. 3, 2015, Available at SSRN: https://ssrn.com/abstract=2692788

Brian B. Murphy (Contact Author)

Statistics Canada

Ottawa, Ontario
Canada
613-951-3769 (Phone)
613-951-5643 (Fax)

Michael R. Veall

McMaster University - Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Michael C. Wolfson

EvidenceNetwork.ca

Dept. of Community Health Sciences
408-727 McDermot Avenue
Winnipeg, Manitoba R3E 3P5
Canada

University of Ottawa

65 Louise Pasteur Pvte
Ottawa, ON
Canada

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