TORONTO, July 10, 2018 (GLOBE NEWSWIRE) -- The Ontario government’s increase to the province’s top personal income tax rate in 2013 may have prevented more than 2,000 new businesses from starting in the province, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
“Tax hikes by the previous government at Queen’s Park discouraged entrepreneurs from starting thousands of new businesses, which are vital for economic growth and prosperity and drive innovation,” said Charles Lammam, director of fiscal studies at the Fraser Institute.
Using 30 years of Canadian data from 1984 to 2015, the study, titled The Effects on Entrepreneurship of Increasing Provincial Top Personal Income Tax Rates in Canada, finds that increases to the top personal income tax rate reduce the number of new businesses started.
That’s because entrepreneurship is inherently risky and higher personal income taxes decrease the potential income (and reward) for entrepreneurs who are successful, reducing their incentive to start a new business.
For Ontario, the study estimates that, holding all else constant, a one percentage point increase to the top personal income tax rate prevents 696 new businesses from starting over a four-year period.
Considering that the previous Ontario government in 2013 raised its top provincial rate 3.1 points to 20.5 per cent, over the same time span of four years, the province may have lost out on 2,158 new businesses.
Crucially, this estimate does not include the impact of the federal government’s four percentage point increase to the federal top personal income tax rate, which will reduce entrepreneurship even further in Ontario and across Canada.
“If the new government in Ontario wants to spur entrepreneurship and increase economic prosperity, reducing the province’s top personal income tax rate would be a good place to start,” Lammam said.
The number of businesses not created over a four-year period due to a one percentage point increase to the provincial top personal income tax rate (by province):
| Ontario | 696 | |
| Quebec | 465 | |
| British Columbia | 315 | |
| Alberta | 275 | |
| Saskatchewan | 85 | |
| Manitoba | 74 | |
| Nova Scotia | 62 | |
| New Brunswick | 54 | |
| Newfoundland and Labrador | 40 | |
| P.E.I. | 14 |
MEDIA CONTACT:
Charles Lammam, Director, Fiscal Studies
Fraser Institute
To arrange media interviews, or for more information, please contact:
Bryn Weese
Media Relations Specialist, Fraser Institute
Office: (604) 688-0221 ext. 589
bryn.weese@fraserinstitute.org
Follow the Fraser Institute on Twitter and Facebook
The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of think-tanks in 87 countries. Its mission is to improve the quality of life for Canadians, their families and future generations by studying, measuring and broadly communicating the effects of government policies, entrepreneurship and choice on their well-being. To protect the Institute’s independence, it does not accept grants from governments or contracts for research. Visit www.fraserinstitute.org