Thursday, 2 April 2015

Flat tax

Alberta's abandoning its flat provincial income tax. Here's Bill Watson's requiem for it:
Everyone’s assumption is that flat-rate taxes can’t be progressive. That presumably bothers Alberta’s Conservatives, who, unlike Ottawa’s, are still at least nominally Progressive. But the assumption isn’t true, at least not in terms of average taxes. If some minimum amount of income is exempt from taxation — and in Alberta it can be over $18,000 — then the average rate of tax rises with income. For example, at a 10% rate the first $10 of income above $18,000 generates a $1 tax liability, which produces an average tax rate of $1/$18,010 or just 0.006%, a rate that rises — progressively — with every extra dollar of income and approaches, even if it never quite reaches 10%.
Some studies done by perfectly reputable economists, i.e., not “far-right” nutbars, suggest the best rate structure, even taking the interests of poor people into account, may by an umbrella, in which rates rise for a while but then, for the super-mobile highest earners, actually decline—though try selling that in the current inequality-obsessed political environment!
The full article is embedded below, in an ingenious setup that Canada's National Post is using. When I selected the text to copy, I had a pop-up asking if I'd like a licence. I said yes, then saw I could embed the full article so long as I also embedded the paper's ads with it. And so it is below. Instead of yelling about bloggers being content thieves (while scraping their scoops without or with little attribution), the Post's making it easy. I like it.

William Watson: Requiem for the flat tax

By ending its flat tax rate Alberta is snuffing out an important policy beacon for all Canadians To conservatives everywhere, a sad part of the latest Alberta budget was the extinguishing of the province's flat tax, which Ralph Klein introduced in 2001. Albertans with taxable income have been paying 10% on any and all additions to…


  1. You mean to say some of the atoll is against economic growth?

  2. Leaving aside the question of why one would want a progressive tax, the beauty of a true flat tax is the huge simplification of the PAYE process for employers. Progressive taxes have to be calculated for each individual employee. To pay a flat tax, just add the total wage bill and multiply by the tax rate. If you do want to exempt the first $N of income, do it through a personal rebate, don't build it into the tax system.