Atlantic Provinces Have Highest Personal Income Tax Rates in Canada for $50,000 Income: Study

St. John's Harbour and city, Newfoundland and Labrador. Bob Hilscher/Shutterstock

Canadians living in Atlantic Canada face the highest personal income tax rates in the country for $50,000 of income, a new study finds.

Atlantic Canada is facing “significant tax competitiveness challenges,” which can be harmful to productivity and economic growth by making the region “less attractive” to skilled workers and business investment, according to a July 3 study published by Canadian think tank the Fraser Institute.

“High marginal provincial taxes aren’t just a problem for high income earners in Atlantic Canada,” study author Ben Eisen said in a statement. “Middle-income earners in the region also face higher tax rates on the next dollar that they earn than most other Canadians.”

Nova Scotia residents earning $50,000 in income are taxed 14.95 percent on the next dollar earned, followed by Newfoundland and Labrador at 14.5 percent, and PEI at 13.47 percent. At this income level, New Brunswick sits in the middle of the Canadian provinces at 9.4 percent.

The lowest personal income tax rates for Canadians earning $50,000 in income are in Ontario at 5.05 percent, B.C. at 7.7 percent, and Alberta at 8 percent.

Meanwhile, a similar pattern emerges for income tax rates faced by Canadians at $75,000 of income, the study found. Nova Scotia has the highest personal income tax rate in this bracket at 16.67 percent, followed by PEI at 16.6 percent, Quebec at 15.62 percent, Newfoundland and Labrador at 14.5 percent, and New Brunswick at 14 percent.

The remaining provinces have lower marginal tax rates for the $75,000 income bracket, ranging from 7.7 percent in British Columbia to 12.75 percent in Manitoba.

At income levels of $100,000, personal income tax rates are at 17.5 percent in Nova Scotia, 16.6 percent in PEI, 15.8 percent in Newfoundland and Labrador, 15.62 percent in Quebec, and 14 percent in New Brunswick.

The lowest income tax rates in this bracket range from 10 percent in Alberta to 10.5 percent in British Columbia.

Overall, the study found that Atlantic Canada is “generally uncompetitive” at every income level relative to the rest of Canada. Only Quebec has comparably high personal income tax rates at several different income levels, the study’s authors wrote.

“If policymakers in Atlantic Canada want to attract more professionals, entrepreneurs and private sector investment to spur economic growth and help create jobs, they should reduce income taxes,” Eisen said.

Business Tax, Capital Gains, Sales Tax

Atlantic Canada also ranks highest for business taxes, which the study indicated is harmful in smaller provinces such as those in the eastern region.

The four Atlantic provinces have the highest corporate income tax rates with Newfoundland and Labrador and PEI at 15 percent, and Nova Scotia and New Brunswick at 14 percent. Manitoba, Saskatchewan, and B.C. are all at 12 percent, while Quebec and Ontario sit at 11.5 percent and Alberta is at 8 percent.

Atlantic Canada also ranks high in capital gains taxes, which the study indicates are “harmful to economic growth, and distort investment decisions while discouraging entrepreneurship.”

Out of all the provinces, Newfoundland and Labrador has the highest capital gains tax at 27.4 percent, followed by Nova Scotia at 27 percent. Ontario and B.C. are next highest, followed by Quebec, New Brunswick, and PEI, while Saskatchewan, Alberta, and Manitoba have the lowest capital gains taxes.

The study also looked at provincial sales tax rates as a contributor to overall tax burden and found Newfoundland and Labrador, PEI, and New Brunswick all had the highest rates among the provinces of 10 percent, followed by Quebec at 9.975 percent, and Nova Scotia at 9 percent.

Provincial sales taxes among the remaining provinces were lower, with Ontario at 8 percent, Manitoba and B.C. at 7 percent, Saskatchewan at 6 percent, and Alberta with no provincial sales tax.

“For regions like Atlantic Canada that have traditionally lagged in their economic development, the stakes are particularly high,” the study says.

“A tax regime that significantly diverges from other jurisdictions can be a substantial barrier to economic development. Higher taxes on income, investment, and consumption all contribute to lower growth, weaker private-sector job creation, and reduced incentives for innovation.”