Income taxes rattle Canada: Rich Californians pay an average of 10%, while Canadians pay 70% more

Time of India

27-05-2025

As affordability remains a key concern across Canada, even during the federal election, both Liberals and Conservatives campaigned to reduce income taxes to provide relief for Canadians, which finally will be implemented in the country, as an income tax cut is planned for July 1 this year, as per a report.
How Much Are Canadians Paying in Taxes?
A new report reveals how much of a burden are income taxes on the typical Canadian. According to The Hub report, the 'typical Canadian' is used to describe a person who is a median income earner and is currently taxed at an average of just over 17% (federal plus provincial). The latest tax cut will reduce the tax by around half a percentage point, which will bring it to just below 17%, reported The Hub.
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Canada's Income Tax Varies by Province
However, how much a working middle-class Canadian pays in income taxes varies based on where the person lives and how much the 'typical Canadian" makes in each province, according to the report.
The Hub report analysed that, in Nova Scotia, where income taxes are highest, a person earning the provincial median income pays one-fifth of their income in tax, while people living in British Columbia and Ontario pay the least tax, which is at 15%, as per the report. Meanwhile, median earners in most of Canada's provinces, like Quebec, Manitoba, and Saskatchewan, pay taxes somewhere in the middle at 18%, reported The Hub.
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How Does Canada's Tax Compare to the US?
However, when the income tax is compared with Canada's neighbour, the median income earners in all the USA's states have a significantly lower tax burden than Canadians do, according to the report. For instance, in California, which is often considered the US' high-tax state, the median income earner's combined tax bill is 10%, which is the United States average, as per The Hub. While, the tax falls to just 7% to 8% for the nine states with no state-level income tax, which includes Texas, Florida, and Washington, according to the report.
The Hub report explained by giving the example that, "if Canada's combined average income tax rate were the same as in the US, the typical Canadian would save almost $4,000 a year. But even seemingly small tax cuts can have an impact, like the change coming on July 1st—it reduces the lowest federal tax bracket by one percentage point, and will save the typical Canadian around $400 a year," as per the report.
While, income taxes are only a small portion of the impact that it has on the Canadian take-home pay and how that compares to the average American, as per The Hub. There are other taxes like "Sales taxes, property taxes, and payroll taxes that also chip away at income," according to the report.
What Do Canadians Get for Their Higher Taxes?
However, the differences in the taxes between Canada and the United States cannot be said to favour one country or the other, as per The Hub.
The report highlighted that the higher taxes Canadians pay are used by the government to provide far more generous family and unemployment benefits than in the United States, and are also used for subsidized post-secondary education and government-funded universal health care, reported The Hub. While, in the United States, "those costs don't show up on the tax bill, but Americans still pay them at the end of the day," as per the report.
FAQs
How much tax does the typical Canadian pay?
Right now, about 17% of their income goes to federal and provincial taxes. After the cut, it will drop slightly.
Why are Canadian taxes so much higher than the US?
They help pay for things like health care, education subsidies, and other family benefits.