Ontario’s per-capita tax burden has risen to $9,406 this year, according to a study from the Fraser Institute, which notes the tax contribution per Ontarian has seen an increase relative to the economic scale in recent years.
Tax revenue in 2017-2018 was equivalent to 12.1 percent of gross domestic product (GDP). In 2023-2024 it was 13.4 percent.
The study says there have not been “meaningful” tax rate reductions applied to any of the major tax categories in Ontario during the tenure of the Progressive Conservative government and the overall tax burden has grown whether measured in real per-capita terms or relative to provincial GDP.
“The provincial tax burden on Ontarians has grown substantially since 2003,” the study’s authors wrote. “It also demonstrates that despite sharp criticisms of his predecessors’ tax policies, Premier [Doug] Ford’s government has not reduced the tax burden on Ontarians.”
Tax Rebates or Reform?
Ontario pledged last October to send a $200 rebate cheque to all taxpayers in the province—an estimated 12.5 million adults—with the cheques going out early this year.
An Oct. 29 government press release said 2.5 million children would also be eligible to receive the rebate.
The government rebate was a bid to offset the “high costs of the federal carbon tax and interest rates,” Ford told reporters at a news conference last year.
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The Fraser Institute report described this style of tax relief as “misguided,” noting that economists have long said that people make spending decisions based on expectations of their revenue over the long-term. Short-term rebates are unlikely to substantially change consumer behaviour, they said.
That doesn’t mean the government is incapable of offering substantial tax relief, however. Tax reform could offer individual and corporate ratepayers a break while also stimulating economic growth, the authors said.
The study put forward two ideas for tax reform, one relatively easy to implement and one more aggressive option.
Tax Reform Ideas
The first tax reform option is eliminating the increases that were put into effect 13 years ago under the previous Liberal government.
If Ford’s government removed the personal tax increases introduced by the province in 2012 and lowered the corporate tax rate by one percent, it would reduce provincial revenue by $5 billion, offering ratepayers a per-person tax reduction of $310, the study said.
Although the province would have less money coming in, its tax revenue as a percentage of GDP would still reach 13 percent, significantly exceeding the 12.1 percent inherited from the last year of former Premier Kathleen Wynne’s administration in 2018.
While this option would offer some tax relief, it would not totally bring the Ford government in line with its promise to reduce the tax burden on Ontarians, the authors said.
The more aggressive option would build on the elimination of the 2012 tax increases by also getting rid of the two surtaxes of 20 percent and 36 percent that are applied to high incomes. It would also include reducing Ontario’s corporate income tax rate to match the lowest level in Canada—Alberta’s 8 percent.
The impact of these two tax policy changes would lower the total tax revenue in Ontario relative to GDP by 1.77 percentage points in 2024 to come in at 11.6 percent. Although this would result in the province being half a percentage point lower than it was in 2017, it would still maintain a tax revenue share of GDP that was consistent with the trends that prevailed throughout Wynne’s tenure, the authors said.
While lowering taxes means less money for provincial coffers, it has many benefits for the province as a whole, Fraser Institute senior fellow Ben Eisen noted.
“Lowering taxes is one way Queen’s Park could boost economic growth, attract more investment and let Ontario workers keep more of their own money,” Eisen said in a press release.
“Pursuing pro-growth tax reform would benefit the province in several ways, including greater economic growth, more business investment and a lower tax burden for Ontario workers.”
