The Resource The personal income tax : average and marginal rates in the post-war period

The personal income tax : average and marginal rates in the post-war period

Label
The personal income tax : average and marginal rates in the post-war period
Title
The personal income tax : average and marginal rates in the post-war period
Creator
Subject
Language
eng
Summary
The personal income tax (PIT) grew rapidly as a share of GDP during World War II and thereafter. In 1946, 16 percent of the population filed PIT returns; by 1992, the figure had risen to 69 percent - 19.4 million individual returns from a population of 28.4 million. Between 1946 and 1971, the rates applied to nominal incomes did not change significantly, but inflation and economic growth - a 70 percent rise in the CPI and an 84 percent increase in real per capita GDP over the period - moved individuals up the rate schedule. Direct taxes on persons rose from 7 percent of personal income in 1946 to 17 percent in 1971. In other words, even though there had been little change in the rate structure, the average Canadian was subject to much higher average and marginal rates in 1971 than he or she had been subject to in 1946. The tax reforms of 1972, 1981, and 1987 flattened PIT rates and broadened the PIT brackets. Nevertheless, owing to further growth in real incomes, base broadening, only partial indexing, and payroll tax growth, direct taxes on persons continued to increase, rising to 22 percent of personal income by 1993. Although the maximum marginal rate was reduced three times between 1972 and 1987 for those with the highest incomes, average PIT rates rose significantly for most taxpayers with average or above-average incomes. The decreases in top marginal rates and the flattening of the rate structure since 1971 have raised concerns about the contribution of the PIT, Canada's only significantly progressive tax, to income distribution goals. Transfer payments to individuals, including refundable GST credits and child tax benefits, have grown rapidly since 1971 and have contributed to income equality. There is evidence that although income before the PIT and transfers has become less equally distributed since 1971, income after the PIT and transfers was more equally distributed in 1993 than in 1971. In view of the current heavy reliance on the PIT in Canada and the "flat tax" debate in both Canada and the United States, it seems unlikely that the PIT will contribute significantly to any increase in income equality in the future. In any case, if greater equality in income distribution is a goal, expenditure policies are likely to be more effective than tax policies as a means of achieving it
Citation source
In: Canadian tax journal = Revue fiscale canadienne. - Toronto. - Vol. 43 (1995),
http://library.link/vocab/creatorName
Smith, R.S
Geographic coverage
North America
Language note
English
http://library.link/vocab/subjectName
  • income tax rates
  • individual income tax
  • average rate of income tax
  • marginal rate of tax
Label
The personal income tax : average and marginal rates in the post-war period
Instantiates
Publication
Label
The personal income tax : average and marginal rates in the post-war period
Publication

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