Far too often bloggers, tweeters and others make the claim that Alberta does not have a "progressive" income tax system (usually followed by the suggestion or implication that it be changed).
In fact, I've got a few e-mails lately asking why the government doesn't implement a "progressive" income tax system.
Let me be very clear about this: ALBERTA ALREADY HAS A PROGRESSIVE INCOME TAX SYSTEM.
The definition of a progressive tax is one where the percentage of tax paid (versus income) goes up as the person's income goes up. Or in other words, that average tax rate goes up as income goes up.
Due to Alberta's decently sized Basic Personal Exemption of $16,977, Alberta's tax system is absolutely progressive.
Here is an example:
Someone who earns $18,977 does not have to pay taxes on the first $16,977, so their taxable income is $2,000. At the 10% tax rate, they would pay $200 in taxes. In terms of an average tax rate or percentage of their income paid in taxes, it works out to 1.1%.
Someone who earns $26,977 does not have to pay taxes on the first $16,977, so their taxable income is $10,000. At the 10% tax rate, they would pay $1,000 in taxes. In terms of an average tax rate or percentage of their income paid in taxes it works out to 3.7%.
Someone who earns $46,977 would have a taxable income of $30,000. At the 10% tax rate they would pay $3,000 in taxes. This works out to 6.4% of their income.
Someone who earns $66,977 would have a taxable income of $50,000. At the 10% tax rate they would pay $5,000 in taxes. This works out to 7.5% of their income.
Someone who earns $116,977 would have a taxable income of $100,000. At the 10% tax rate they would pay $10,000 in taxes. This works out to 8.5% of their income.
As income goes up, so does their average tax rate. Or in other words, Alberta currently has a progressive income tax system.
What these people often want is a graduated rate or progressive rate system. It too would be progressive, but it's incorrect to claim that Alberta's current tax system is not progressive.
Is Canada Off Track?
Canada has problems. You see them at gas station. You see them at the grocery store. You see them on your taxes.
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