Here’s Yet Another New Way To Tax Canadians

Cities across Canada could soon have a new way to raise revenue if a proposal from the Canadian Centre for Policy Alternatives gains traction. The think tank is pitching the idea of allowing municipalities to collect a municipal income tax through the Canada Revenue Agency.  

Yes, it’s a new way to tax people.

Senior economist David Macdonald explains that under the proposal, cities would be able to tack on a 1% income tax to certain income brackets. This would provide an alternative revenue stream beyond just property taxes.

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“Instead of being heavily reliant on property taxes, they can diversify their revenue base and access income taxes if they want,” Macdonald told CityNews.

The proposal comes as many cities are facing financial constraints after years of having major programs downloaded onto them by provincial and federal governments, despite not having the same tax tools as higher levels of government. Macdonald notes that seven Canadian cities now have bigger expenditures than the smallest territory.

He estimates that Vancouver alone could raise an additional $100 million per year by implementing a 1% tax on incomes above $56,000. Nationally, urban revenues from income taxes rose around 50% from 2019-2022, compared to just 7% for property taxes over that period.

Macdonald argues that property taxes are inherently flawed as primary revenue sources, as the amount cities collect stays flat even as home values rise year-over-year. He adds that prior to the 1940s, it was common for municipalities to levy income taxes before those powers were removed.

“These are powers that cities used to have about a century ago, but they haven’t really had since the Second World War,” he said.

While potentially controversial especially in today’s inflationary environment, proponents say a municipal income tax could provide cities with a way to keep up with funding needs for key services as they take on greater responsibilities.

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