Giving and taking away : How taxes and transfers address inequality in Canada

MacdonaldLaurier.ca Executive Summary I n the run-up to the federal budget, there are calls for the government to increase the use of the tax and transfer system to modify the distribution of incomes in Canada. [...] Taxes only further lower the ratio of the highest to the lowest income groups from 6.8:1 to 5.4:1, much less than the impact of transfers. [...] This downplays the progressivity of government transfers and the overall impact of the government tax and transfer system.1 This short paper summarizes the progressivity of both taxes collected and transfers paid by gov- ernments for the five income quintiles in Can- ada. [...] This allows for a better understanding of the A focus on the progressitivy extent of government interventions in transform- ing the market distribution of income into actual of income taxes downplays the outcomes, and the greater role played by trans- progressitivity of transfers. [...] The Impact of Transfers on Total Incomes T able 1 begins with the distribution of market incomes for the five income quintiles, ranging from an average of $7700 for the lowest quintile to $108,400 for the highest (row 1 in table 1).