System?
Assessing how the entire tax system affects the distribution of income is
complicated by two factors. First, the progressivity of the system depends
on the mix of the different taxes. Federal taxes tend to be somewhat
progressive; the progressivity of the income-tax system and the use of a
low-income GST tax credit more than offset the regressivity of the federal
GST. Provincial and municipal governments rely heavily on sales and
property taxes and thus have tax systems that are probably slightly
regressive.
Second, income from different sources is taxed at different rates. For
example, in the federal personal income tax, income from royalties on oil
wells is taxed less than income from royalties on books, and profits from
sales of assets (capital gains) are taxed less than wages and salaries. To
evaluate progressivity, therefore, one needs to know how different levels
of income are related to different sources of income.
Many economists have concluded that the overall Canadian tax system is roughly proportional
for middle-income classes and mildly progressive for low- and high-income persons.