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Study: High-income Canadians

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The Daily

Monday, September 24, 2007
2004 (correction)

An annual income of $89,000 was enough to put an individual among the 1.2 million Canadians who made up the top 5% of the country's taxfiler population in 2004, according to a new study.

Similarly, an income of $181,000 was sufficient to put someone among the 237,000 people in the top 1% of the taxfiler population.

But to be part of the richest one-hundredth of a percent (0.01%) of taxfilers, Canadians had to have income of more than $2.8 million, the study found.

The study, released today in the September issue of Perspectives on Labour and Income, uses tax returns and survey data to explore trends in the number and characteristics of high-income Canadians, as well as their wealth and the effective income tax rates they face.

Between 1992 and 2004, constant-dollar income for people in the top 20% of the taxfiler population rose substantially, and the gains got bigger the higher up the income distribution. However, individuals in the rest of the population generally saw little improvement in constant-dollar income.

In 1992, Canadians in the top 5% of the taxfiler population accounted for about 21% of total income. By 2004, they accounted for 25% of total income.

High-income Canadians: Who they are

Of the 1.2 million Canadians who comprised the top 5% of income recipients in 2004, three-quarters were men, even though men were a minority (48%) of individual income recipients in general.

In 1982, women accounted for one in seven of the top 5% of income earners; by 2004, they accounted for one in four. However, their share of the top 0.01% declined from 12% to 11%.

The study found that the prevalence of high income peaked in the pre-retirement years. In 2004, individuals aged 45 to 64 represented 33% of all income recipients, but they were the majority in the top 5% (54%).

In the top 0.01%, taxfilers aged 45 to 64 accounted for three out of every five individuals.

Taxfilers aged 25 to 44 were the second largest group in the top 5% of high-income recipients. However, seniors were in second place in the top 0.01%, accounting for 23%.

Over three-quarters (78%) of all high-income individuals were married, as were 83% of the top 0.01%.

High-income Canadians: Where they live

Almost half (46%) of the top 5% of the taxfiler population lived in Ontario. Quebec was a distant second, at 18%, followed by Alberta (15%) and British Columbia (13%).

Among the top 0.01% of the taxfiler population, more than one-half (51%) lived in Ontario. However, Alberta was second at 23%, while Quebec was fourth at just 10%.

Higher-income families tend to be located in the larger urban centres. Three out of 10 (31%) families with incomes of more than $250,000 lived in Toronto, followed by Montréal (11%), and Vancouver and Calgary (both 8%).

Overall, from 1992 to 2004, each demographic group experienced real increases in income. Some groups, such as individuals aged 45 to 64 and those living in Alberta, experienced much larger changes, both incurring gains of about 60%.

Overall, though, many groups experienced very little change—younger individuals (under 45), older individuals (65 and older), and those living in the smaller provinces.

High-income Canadians as a group pay higher tax rates

The study also examined effective income tax rates, an important indicator of the fairness of a tax system. The effective tax rate is the ratio of taxes paid to total income.

The study found that in line with their increasing share of total income, high-income Canadian taxfilers have been paying an increasing share of total personal income taxes. As well, effective income tax rates are clearly higher in the higher-income groups, reflecting the progressive nature of the income tax system. However, effective rates vary widely across the income distribution as well as among individuals within the highest income group.

In 2004, the top 5% of the taxfiler population received 25% of income and paid 36% of taxes. In contrast, the bottom 95% of the taxfiler population received 75% of income and paid 64% of taxes.

For high-income Canadian taxfilers, effective tax rates were about 30%, compared with roughly 12% for non-high-income filers.

Nearly one-third of those in the top 0.01% had an effective tax rate of over 40%, although some paid as little as 10%. Among the top 5% of the taxfiler population, only 2.7% had an effective tax rate of over 40%.

The study found that between 1992 and 2004, the proportion of taxfilers who paid zero taxes declined at almost all income levels. In the top 0.01%, about 100 taxfilers paid no taxes in 2004. Tax deductions, such as business losses and gifts to the Crown, are responsible for a number of these situations.

Canada vs. the US: Disparity most striking at the extreme high end

The study found that differences between Canada and the United States were most striking at the extreme high end of the taxfiler population.

In Canada, the top 5% of taxfiling families in 2004 had an income of at least $154,000. The 5% threshold for the United States was only slightly larger at $165,000. Further up the income distribution, the thresholds diverged considerably.

The threshold for the top 0.01% of taxfiling families in Canada was just over $4.3 million; in the United States, it was more than twice that at $9.4 million.

However, these differences paled when comparing average income. In 2004, in Canada, the average income for the top 5% of families was $296,000; in the United States, it was 40% higher at $416,000.

The differences grew much larger higher up the income distribution. For the top 0.01% of the taxfiler population, the average American family income was $25.8 million, over three times the Canadian figure of $8.4 million.

Definitions, data sources and methods: survey number 4105.

The article, "High-income Canadians", is now available in the September 2007 online edition of Perspectives on Labour and Income, Vol. 8, no. 9 (75-001-XWE, free), from the Publications module of our website. The article is based on the research paper, A Profile of High-income Canadians (75F0002MIE2007006, free), which is also available.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Brian Murphy (613-951-3769;, Income Statistics Division.