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Equity comparison between
alberta & british columbia on thebasis of personal income taxsystems
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Why is this issue important?
It affects the economic well-
being of the residents (tax-payers) of both provinces.
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Issues being addressed
Is Progressive tax system fairer than proportionaltax system?
Which tax system promotes better equity(vertical and horizontal)?
Which tax system reduces income inequalities?
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hypothesis
Progressive tax system in BC leads tobetter equity as compared to the
proportionate tax system in Alberta
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Population - 3,779,400
GDP - C$178.225 billion
GDP per capita - C$49,563
Unemployment rate 5.4%(Sept 2011)
Minimum Wage
September 2011 9.40/hour
Main industries Oil and Gas,Petrochemicals, Agriculture,Food and Beverages, Tourism,Industry Machinery andEquipment
Population - 4,400,057
GDP - C$191.006 billion
GDP per capita - C$41,689
Unemployment rate 6.9%(Feb 2012)
Minimum Wage
May 1, 2011 $8.75/hour;
November 1, 2011 $9.50/hour;
May 1, 2012 $10.25/hour
Main industries Forestry,Mining, Fisheries, Agriculture,Energy and transportation
Few Facts about the provinces
BritishColumbia
Alberta
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Proportional tax system is asystem in which the
proportion of income paid intaxes is the same for allincome levels.
Rich pay more Poor paymore
Revenues vary according tothe income
Promotes horizontal equityonly
Progressive tax systemlevies taxes according to the
individuals income
Rich pay more Poor payless
Stable income stream for the
government Promotes horizontal and
vertical equity
Tax systems
Progressive TaxSystem
Proportional TaxSystem
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2012 TaxableIncome
2012 Tax
Rates
first $37,013 5.06%
over $37,013 upto $74,028
7.70%
over $74,028 upto $84,993
10.50%
over $84,993 upto $103,205
12.29%
over $103,205 14.70%
Tax brackets
British Columbia Alberta
2012 TaxableIncome
2012 Tax Rates
Total taxableincome
10%
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Hey, wait a minute..!!
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Fact BC has the highestincome inequality in canada
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Methodology for analysis
Comparison of Gini coefficients forMarket Income, Total Income and Aftertax income to identify income
inequalities between BC and Alberta Market Income - Total income before tax minus
income from government sources.
Total Income - Total income refers to income from all
sources including government transfers and beforededuction of federal and provincial income taxes.
After-tax Income - After-tax income is total income,which includes government transfers, less incometax.
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GINI coefficient
The Gini coefficient is anumber between zero andone that measures therelative degree of inequalityin the distribution of income.
The coefficient would
register zero (minimuminequality) and it wouldregister a coefficient of one(maximum inequality).
To calculate the Ginicoefficient, you divide the
orange area (A) by the sumof the orange and blue areas(A + B).
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Income inequality in canada is on rise
Statistics Canada. Table 202-0705 - Gini coefficients of market, total and after-tax income, byeconomic family type, annual (number)
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Gini coefficients for market income
Statistics Canada. Table 202-0705 - Gini coefficients of market, total and after-tax income, byeconomic family type, annual (number)
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Gini coefficients for total income
Statistics Canada. Table 202-0705 - Gini coefficients of market, total and after-tax income, byeconomic family type, annual (number)
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Gini coefficients for after-tax income
Statistics Canada. Table 202-0705 - Gini coefficients of market, total and after-tax income, by
economic family type, annual (number)
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Reasons explaining inequality
1. Low Wages A particular job in Alberta pays you more ascompared to the same job in BC.
2. Low Tax Credits as compared to Alberta
Source LivinginCanadaWebsite
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PROVINCIAL COMPARISON - AVERAGEWEEKLY WAGE RATE
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Non-refundable Tax credits
2012 Tax Credits (indollars)
British Columbia Alberta
Basic personal amount 11,354 17,282
Spousal amount 9,964 17,282
Infirm dependent amount(18+)
4,250 10,004
Disability amount 7,285 13,331
Caregiver amount 4,250 10,004
Pension income amount 1,000 1,331
Medical expense 2,020 2,233Education part time permonth
60 202
Education full time permonth
200 672
Age amount 4,356 4,816
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What can help?
What should alberta do?
Increase the minimum wage -
Public Interest Alberta discussed
under the living wage campaign that
a living wage would be much more
than $12/hour
Start progressive tax system
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What can help?
What should BC do?
Increase the tax credits so that more money can stay in poorpersons pocket.
Increase the marginal tax rates for higher income brackets.
Demolish PST.
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Questions?