Atlantic Canadians pay higher personal income tax rates: Fraser Institute

Atlantic Canadians are taking home less money on average than their fellow Canadians and Americans.

According to a new study by the Fraser Institute, a right-leaning think tank, across all income levels, workers in Atlantic Canada pay higher personal income tax rates.

"This is really persistent problem for Canada," said Jake Fuss with Fraser Institute. "It ultimately means that it's harder for us to attract professionals, business owners, entrepreneurs to work and invest in Canada."

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When looking at income of $75,000, Prince Edward Island has the highest tax rate at 37.20 per cent, which is slightly higher than its neighbours.

"This result is mainly due to P.E.I.'s relatively lower income tax threshold for a rate that generally applies at higher incomes in other provinces," said a spokesperson with P.E.I.'s Finance Department.

The spokesperson noted P.E.I. is in the middle of the pack among provinces for most metrics during the period studied.

In Nova Scotia, the government recently announced as of Jan. 1, 2025, it will index personal income tax brackets, the basic personal amount, and certain non-refundable tax credits. It claimed it would be the largest tax break in the province's history.

The finance minister walked back that statement, but Premier Tim Houston stood by the claim.

"Personal income taxes pay for valuable public services like healthcare and education," said a spokesperson with Nova Scotia's Finance Department.

They said its estimated personal income taxes will make up about 26 per cent of the government's $15.8 billion revenue estimate presented in this year's budget.

"Ultimately, there's a lot of government spending, and ultimately the Atlantic provinces are assessing these high tax rates to compensate for that high spending," said Fuss.

According to Fraser Institute, based on an income of $50,000, the combined statutory marginal income tax rates for Atlantic Canada are around 29 per cent.

Moncton-based financial planner John Maisey says that means a worker is left with about $40,000.

"It's not about what you make, it's about how much you keep," said Maisey. "We are at a bit of a disadvantage in some ways over a lot of other provinces. In Atlantic Canada, New Brunswick is probably the place to be for someone who's got an average wage of 50-grand right now."

In New Brunswick, additional reductions to the personal income tax rate came into effect last year.

"Since 2021, the combined personal income tax reductions have provided an estimated $138 million annually in tax relief," said a spokesperson with the Finance and Treasury Board.

The spokesperson said the measures also include increases in the basic personal amount and low-income tax reduction threshold.