A well-known Canadian tax commentator once wrote (paraphrasing here) that a good advisor knowledgably counsels where taxes are, whereas a great advisor guides where taxes will be.
Myself, I can only claim to have been good enough to notice that things appeared to be at a turning point when Nova Scotia tabled its 2010/2011 budget. The province had boldly moved to introduce a provincial tax bracket above the top federal tax bracket – and at an effective combined rate of 50% to boot. For context, no province had a bracket above the top federal bracket at the time, and the last time a combined federal-provincial tax bracket was 50% was in the year 2000.
On the face of it, this was arguably a non-event beyond that provincial border. Still, whether Nova Scotia influenced other provinces or just reflected what was brewing in parallel elsewhere, half a decade later, it’s getting crowded at the top.
Nova Scotia 2010
In 2009, Nova Scotia commissioned two studies on balancing its fiscal state, which it began acting upon in its 2010 budget. At the time, the 29% top federal tax rate applied to income over $127,021. The province introduced a new top personal tax rate of 21% on income over $150,000, making for a combined rate of 50%.
Concurrently, the 10% provincial surtax (that otherwise applied to income above about $83,000) was suspended. Ironically, this meant lower net taxes for those with incomes of up to about $170,000. Both provisions were to remain in place until the provincial budget was balanced, which remains pending.
Ontario 2012 to 2014
In 2012 Ontario imposed an additional 2% rate for income over $500,000, dubbed by some as a “super tax.” As in Nova Scotia, it was temporary until a balanced budget could be reached, which at the time was projected for 2017. This was implemented in two stages – 1% in each of 2012 and 2013. Unlike Nova Scotia, Ontario did not suspend its surtax, meaning the true full addition was 3.12% for a total top tax rate of 49.53%.
Initially defeated on its 2014 budget, the incumbent Liberals returned with a majority, passing its budget that eliminated the $500,000 income tax bracket and replaced it with a 1% addition at each of the $150,000 and $220,000 income thresholds. The net effect is the same 49.53% tax rate, but the “temporary” sticker has been removed.
Quebec 2013
Until 2012, Quebec’s top provincial tax rate was 24%, applicable to income over $80,198. The 2013 budget introduced a new tax rate of 25.75% on income of $100,000 and over. After applying the Quebec abatement for federal taxes, the top combined tax rate is 49.97%.
British Columbia 2014
A top 16.8% tax rate was introduced on income over $150,000, for a combined total tax rate of 45.8%. This income bracket is a two-year temporary measure scheduled to expire at the end of 2015, as confirmed in the 2015 budget.
New Brunswick 2015
Two provincial income tax rates were added – 21% for income over $150,000 and 25.75% for income over $250,000. The top combined tax rate in 2015 is 54.75%.
Newfoundland and Labrador 2015
Two provincial income tax thresholds were added at $125,000 and $175,000. In a phased implementation, the top tax rate will be 14.3% in 2015, rising to 15.3% in 2016. The combined tax rate in 2016 will be 44.3%.
Yukon 2015
The territory added a 15% tax bracket applicable to income over $500,000. The top combined tax rate in 2015 is 44%.
Alberta 2015
The long-time incumbent Conservative party was defeated in a spring election, replaced by a New Democratic Party majority. The ensuing budget added three tax brackets above the top federal tax bracket. At the top, income over $300,000 will be taxed at 11.25% in 2015, for a combined top tax rate of 40.25%. In 2016, that top provincial tax rate rises to 15%, or 44% combined.
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Current top tax brackets and rates
BC $151,050 45.80%
AB $300,000 40.25%
SK $138,587 44.00%
MB $138,587 46.40%
ON $220,000 49.53%
QC $138,587 49.97%
NB $250,000 54.75%
NS $150,000 50.00%
PE $138,587 47.37%
NL $175,000 43.30%
YK $500,000 44.00%
NT $138,587 43.05%
NU $138,587 40.50%
Note: Bold figures indicate those provinces/ territories that have a bracket higher than the top Federal bracket of $138,587 in 2015.