Eroding tax fairness : Growing gap problem

The assumptions and calculations underlying the simulation results were prepared by the author; responsibility for the use and interpretation of these data is entirely that of the author. [...] A well-known study, Vermaeten, Gillespie and Vermaeten (or VGV, 1994 and 1995), last looked at Canadian tax incidence for the period ending in 1988.2 Between 1951 and 1988, the period that captures the development of modern social programs, average tax rates fell for the poorest 10% and for the top 2% of the income distribu- tion, and increased for most families in the middle. [...] Overall, the Canadian tax system in 2005 has become flatter, with total tax rates ranging from 30.7% of income at the bottom of the income spectrum, some modest progressivity up to the middle of the income distribution, peaking at 36.5%, then modestly regressive thereafter, falling back to 30.5% for the top 1% of families. [...] Thus, much of the change in total taxes comes from actions at the provincial level to cut taxes, with impacts at the top and the bottom of the distribution exacerbated by changes in federal tax rates. [...] Federal and provincial commodity taxes have roughly the same inci- dence, and the pattern over the 1990 to 2005 period is also very similar, with a small reduction in tax rates in the middle of the distribution.