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Thread: Canada's Laffer Curve Lesson: Government Collects Less Revenue from High-Income Earne

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    Canada's Laffer Curve Lesson: Government Collects Less Revenue from High-Income Earne

    Higher taxes ⇏ higher revenues.

    Canada's Laffer Curve Lesson: Government Collects Less Revenue from High-Income Earners after Trudeau Tax Hike

    ...The nation’s current top politician, Justin Trudeau (a.k.a., Prime Minister Zoolander), increased the top tax rate from 29 percent to 33 percent after taking office in late 2015.

    It appears, though, that he wasn’t aware of a concept known as the Laffer Curve (or, like some folks on the left, maybe he simply didn’t care).



    n the real world, however, it turns out that increasing tax rates is not the same as increasing tax revenue.

    Here are some excerpts from a story in the Globe and Mail:

    The Liberal government’s tax on Canada’s top 1 per cent failed to produce the promised billions in new revenue in its first year, as high-income earners actually paid $4.6-billion less in federal taxes. …The latest available tax records show that revenue from Canadians earning about $140,000 or more – which had previously been the fourth and highest tax bracket – dropped by $4.6-billion in 2016, the first full year that the Liberal tax changes were in effect. Further, 30,340 fewer Canadians reported incomes in that range for 2016 compared with the year before. …The new top bracket with a 33-per-cent tax rate was predicted to raise about $3-billion a year in new revenue… Critics of the Liberal plan say the CRA’s 2016 numbers justify their concern that a new top tax bracket hurts Canadian efforts to boost competitiveness and attract top talent.

    ...
    The article looks at claims about transitory effects, but concludes:

    The bottom line is that the experts at the C.D. Howe Institute believe the central government will eventually collect more revenue from the higher tax rate, but:

    1. The revenue will be less than projected by static revenue estimates because of permanently lower levels of taxable income.
    2. The added revenue for the central government is more than offset by lower tax receipts for subnational levels of government.

    In other words, Trudeau’s tax hike was a big mistake. The only tangible results are that the private sector is now smaller and the country is less competitive.
    Tradition is not the worship of ashes, but the preservation of fire. ― Gustav Mahler

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