OPINION: Premier Ford can make hard work pay off in Ontario

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With his new term, Premier Doug Ford must now deliver his election to promise to “ensure that Ontario is the economic engine of Canada, with one of the fastest growing economies in North America”. This will require a host of policy changes, but none more important than dealing with Ontario’s growth-killing taxes.

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While Ontario families have faced a host of tax increases over the years, none have been more economically damaging than the income tax hikes for the province’s highly skilled workers. , including entrepreneurs, engineers, lawyers and doctors. From 2012 to 2014, the Ontario government “temporarily” increased the province’s top personal income tax rate several times, from 17.41% to 20.53%. The federal government increased personal income tax in 2016 by increasing its top marginal tax rate from 29% to 33%. As a result, Ontario’s top personal income tax rate (federal and provincial combined) is 53.5%, the third among the 60 US states and Canadian provinces (except Nova Scotia and Newfoundland and Labrador).

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Now consider the top marginal tax rate in the province (“marginal” is the economic term for the tax rate on the next dollar of income you earn). In addition to income taxes, when you also include Ontario’s 13% HST and other types of taxes, including property taxes, payroll taxes, and gas taxes, the Total overall taxation on additional income for many professionals, entrepreneurs and highly skilled workers is over 72%.

This is a major issue for Ontario because to research shows that high marginal tax rates discourage productive economic activities such as work, savings, investment and entrepreneurship. When 72¢ of every extra dollar a family earns is used to pay taxes, hard work just doesn’t pay off.

Ford demonstrated its knowledge of the impact of high taxes. In his 2018 platform, he promised to reduce provincial taxes for doctors to encourage them to move to northern Ontario.

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But why stop there? Why not send a message to Ontario entrepreneurs, professionals and skilled workers that hard work pays off in the province? Why not send the same message to the same entrepreneurs, professionals and skilled workers across Canada and the United States? Come to Ontario, your hard work pays off.

For starters, the government could reverse Ontario’s “temporary” income tax hike to stimulate economic activity while costing the province very little in lost revenue. A study 2020 found that lowering the province’s top tax rate from the current 20.53% to 17.41%—where it was before a “temporary” rate hike in 2012—would encourage many more economic activity. So much so that after five years, the revenue loss would amount to only about $150 million (or less than 0.5%) of the $45 billion or more in personal income tax the government collects. every year.

Improving the incentives to work hard, save, invest and take business risks is simply good economic policy. If Premier Ford wants to keep his promise to restore Ontario as the engine of economic growth and prosperity in North America, improving incentives through tax cuts would be a good place to start.

Jake Fuss and Niels Veldhuis are analysts at the Fraser Institute.

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