Neil Reynolds’ Fuzzy Tax Math

If you need help with your tax return, don’t ask Neil Reynolds. His latest attack on the New Democrat proposal to collect modestly more tax from Ontario’s super-rich stated that “the province’s highest marginal rate on personal income would rise, federal and provincial rates combined, from 46.4 per cent to 49.4 per cent – meaning that this rate would theoretically net $247,000 in revenue.”

The New Democrat proposal would actually produce a top combined marginal rate of 49.5%. (Reynolds got this figure right in his prior column on the subject.)

As far as I can tell, Reynolds arrived at $247,000 by multiplying $500,000 and 49.4%, treating a top marginal rate as though it were a flat or average rate. In fact, the New Democrat proposal would apply only to income in excess of $500,000. Taxes on the first $500,000 would not change.

One has to wonder whether similarly fuzzy math underlay Reynolds’ previous claim: “People who make more than $500,000 already work full-time for the state (federal, provincial and municipal) for perhaps eight months a year.”

An Ontarian with $500,000 of taxable income and only the basic personal credits in 2011 would pay $133,325 of federal income tax (($500,000-$128,800)*29%+$27,256-$10,527*15%), $52,273 of basic provincial income tax (($500,000-$75,550)*11.16%+$5,364-$9,104*5.05%), $26,578 of Ontario surtax (($52,273-$4,078)*20%+($52,273-$5,219)*36%) and $900 of Ontario health premium.

So, the maximum income tax payment on $500,000 is $213,076. Of course, Reynolds’ claim of eight months of servitude also includes property tax and HST.

If our imaginary rich guy owned a $5-million mansion in Toronto, he would pay property tax of $39,646 ($5,000,000*0.7929218%). If he somehow managed to spend all of his after-tax income on goods and services subject to HST, he would pay $28,448 of HST ($500,000-$213,076-$39,646 =$247,278=$218,830*1.13; $247,278-$218,830=$28,448).

These extreme assumptions would bring his total tax payments to $281,170 ($213,076+$39,646+$28,448). That’s 56% of taxable income, which corresponds to below seven of twelve months.

The same calculations for an Ontarian with a million dollars of taxable income and a $10-million mansion produce a total tax bill of $579,129 ($445,124+$79,292+$54,713). That’s 58% of taxable income, which is still below seven months.

The New Democrat proposal would not affect the first rich guy. But it would increase the even richer guy’s taxes to $592,935 ($460,724+$79,292 +$52,918), 59% of taxable income or just over seven months.

Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.


  1. A reasonable question would be… is it fair to require an individual to pay seven months of their annual income to the government?

    I don’t think it is.

  2. @Russ R.: It depends. If someone is making less than the living wage for a particular area and struggling to survive, then clearly, no, they shouldn’t pay that much in tax.

    But if someone is making hundreds of thousands, if not millions, then yes, absolutely. Why shouldn’t they pay 80 or 90% tax like they used to? They’ll still be left with tons of money; it’s no hardship to them.

    But the main reason they should pay that much is that the more one makes, the less one has earned. Compare how hard someone cleaning toilets has to work, and how awful the conditions are, to a hedge fund manager working in a fancy air conditioned office just pushing paper around and giving other rich folks advice. It’s not hard work, and it has far less social value (approaching zero, really) than having clean washrooms.

    I don’t see any reason why anyone should make more than a decent, livable amount based on how hard you work, how long you work, and how poor the conditions of work are. Why should some have helicopters and golden ice cream while others want for shoes and food?

  3. “is it fair to require an individual to pay seven months of their annual income to the government?”

    “Their” annual income? You mean, they earned it all by themselves — with no help from the government? Didn’t use any roads? Didn’t turn on the internet, or the lights? Didn’t rely on contract law? Didn’t enjoy the safety of police, fire and medical emergency response protection?

    OK, yes, that person can keep “their” income.

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