Economists are warning that trying to raise $3 billion by taxing Canada's wealthiest citizens in order to give a tax cut to those in the middle may not work.
Speaking to The Globe and Mail, Michel Kelly-Gagnon warned that Trudeau's proposed 33% tax rate on those earning $200,000 a year or more could actually hurt Canada's competitiveness by driving the combined federal-provincial tax rate above 50% in several provinces.
“What’s worrisome is the combined effects … It could affect the brand,” Kelly-Gagnon said.
If Trudeau wins October's election and brings in his proposed tax hike, the top rate for high income earners in Quebec would hit 58.75%, in Nova Scotia the top combined rate would be 54%.
Other provinces would hover around 50%.
That is a threshold economists often warn should not be crossed.
The higher the tax rates simply encourage people to find ways to avoid paying such high taxes, or they move.
Philip Cross, the former chief economic analyst at Statistics Canada, told The Globe that Trudeau's proposal won't bring in the $3 billion expected.
“Not a chance,” he said. “These are the people who are best positioned to take advantage of loopholes in the system. The idea of soaking the rich to pay for benefits for other people never works out.”
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