Incomes grow for the top 1% and bottom half of tax filers in 2018, stays flat for the rest

Released: 2020-11-18

Over each two-year period, some Canadians fall into low income while others rise out. Among tax filers who were not in low income in 2017, 3.9% entered into low income in 2018.

New data are now available on low-income entry and exit rates, high income, income mobility and effective tax rates for Canadian tax filers for 2018. While the estimates do not reflect the impacts of COVID-19, they do provide a baseline for developments in the COVID period, and shine a light on which Canadians may be more and less vulnerable. For example, statistics on entry and exit from low income indicate that some groups tend to be both more likely to enter low income and less likely to exit low income than others. The tax data allow us to examine low-income entry and exit rates by sex, age, family structure and immigration status.

Tax filers in lone-parent families most likely to fall into low income

Some groups of Canadians were more likely to enter into low income in 2018 than others. With an entry rate of 9.8%, tax filers from lone-parent families with children under age 17 had an above-average chance of falling into low income. Immigrant filers who had lived in Canada for fewer than six years (7.2%), filers who lived alone (6.6%) and filers aged 18 to 24 (6.1%) also had higher low-income entry rates. While the low-income entry rate for these groups of Canadians varies slightly from year to year, these same groups were more vulnerable to falling into low income in most years.

Among tax filers who were already in low income in 2017, 28.1% exited the situation in 2018. Tax filers from lone-parent families with children under age 17 (with an exit rate of 23.3%) and filers living alone (with an exit rate of 22.2%) were less likely to exit low income. This means that tax-filers in lone-parent families with children under age 17 and those who lived alone faced two challenges: they were more likely to fall into low income, and they were less likely to rise back out.

In contrast, filers living in couple families with children under age 17 had a relatively low likelihood of falling into low income (3.3%) and the highest likelihood to exit (37.9%) in 2018 (after being in low income in 2017).

Incomes grow for the top 1% and bottom 50% tax filers, but stay flat for those from the upper-middle of the distribution

Real average total income for the top 1% tax filers grew 1.5% to just under half a million dollars ($496,200) in 2018, while filers from the bottom 50% of the distribution saw their average total income grow 1.7% to $17,900. In comparison, real average total income for filers in the upper-middle (50th to 90th percentiles) stayed flat from 2017 to 2018 ($59,400).

The top 1% tax filers received 10.0% of the nation's total income in 2018, an increase of 0.1 percentage points from 2017. Nevertheless, their income share was lower than the peak of 12.1% they registered in 2006.

Tax filers in the bottom 50% saw their total income share increase to 18.0% (+0.2 percentage points) in 2018. The income share of tax filers in the upper-middle of the distribution decreased 0.2 percentage points to 47.8% in 2018.

To be included among the top 1% in 2018, a tax filer needed a total income of $244,800 or more. A total income below $36,300 would place a tax filer in the bottom 50%, while income between $36,300 and $97,900 would place a tax filer in the 50th to 90th percentiles of the income distribution.

Share of women in the top 1% rises

Women represented nearly one-quarter (24.3%) of the 283,015 Canadian tax filers in the top 1% in 2018, up 0.1 percentage points from 2017. Women in the top 1% in 2018 continued to have lower average total income ($429,500) than their male counterparts ($518,600), a gap of 17.2%.

Number of top 1% tax filers living in Alberta continues to decline

The number of top 1% tax filers grew in all provinces and territories except Alberta, where it dropped 2,675 to 49,530 in 2018, the fourth straight year the province saw its share of top 1% tax filers decrease since 2014 when oil prices collapsed.

Effective tax rate edges up slightly in 2018

Canadian tax filers spent, on average, 11.8% of their modified total income on federal, provincial/territorial income taxes and employee contributions to Employment Insurance (EI) and the Canada/Quebec Pension Plan (federal payroll taxes) in 2018, up by 0.1 percentage points from 2017.

This 0.1 percentage point increase was mainly driven by a similar change in the effective income tax rate at the federal level between 2017 and 2018. On average, there was essentially no change in effective federal payroll tax rate and in the overall provincial/territorial effective income tax rates.

Comparing the rate by province/territory, there was a marginal decrease in provincial/territorial effective income tax rate in Nova Scotia by 0.2 percentage points, a 0.1 percentage point decrease in each of Newfoundland and Labrador, Prince Edward Island and Saskatchewan, no change in Alberta and British Columbia, and a 0.1 percentage point increase in the remaining provinces/territories.

Effective tax rate grows faster for the top 1% tax filers

The overall effective tax rate for Canada's top 1% of tax filers rose 0.7 percentage points, from 31.0% in 2017 to 31.7% in 2018. Both federal and provincial/territorial income taxes contributed to this change. Of the 0.7 percentage point rise, 0.4 came from a rise in provincial/territorial effective income tax rate and 0.3 came from a rise in federal effective income tax rate.

Products

The Income, pensions, spending and wealth portal, which is accessible from the Subjects module of the Statistics Canada website, provides users with a single point of access to a wide variety of information related to revenue, pensions, spending and wealth.

Contact information

For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca) or Media Relations (613-951-4636; STATCAN.mediahotline-ligneinfomedias.STATCAN@canada.ca).