Federal Taxes and Transfers Across Canada: Impact on Families

Abstract

Deussing analyses the distribution of federal taxes and transfers across provinces and family income groups in Canada. She confirms previous results as far as federal total taxes and federal direct transfers are concerned. In particular, the federal total tax incidence is found to be progressive, mainly reflecting the progressivity of the personal income tax. For given income groups total federal taxes are distributed quite uniformly across provinces. In contrast, the relative size of federal direct transfers varies significantly across provinces and family income groups, mainly because of the influence of employment insurance benefits. The impact of these transfers is found to be progressive, with average transfer rates being more important for lower-income groups. Finally, the distribution of total indirect transfers appears to be progressive, with considerable variation across provinces for lower-income families and little variation for higher-income groups. This finding leads Deussing to conclude that the previous argument that low-income Canadians in high-income provinces are funding transfers to higher-income residents of low income provinces cannot be supported.