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CANADA AND USA –
INCOME TAX COMPARISON
BY: PAUL YOUNG CPA, CGA
DATE: FEBRUARY 27, 2017
BIO – AUTHOR – PAUL YOUNG
• Paul Young
• CPA, CGA
• 15+ years in Corporate Finance
• 12+ years in Financial Solution
• 8 years in Academia
• Blogger on Financial Solutions, Economic Indicators and Government Policies
PERSONAL TAX RATES (FEDERAL)
• Source – CRA and Tax Policycenter.org
CORPORATE TAX RATES (FEDERAL)
• Source – CRA and Tax Policycenter.org
The basic rate of Part I tax is 38% of your taxable
income, 28% after federal tax abatement.
After the general tax reduction, the net tax rate is 15%.
For Canadian-controlled private corporations claiming
the small business deduction, the net tax rate is 10.5%.
The revised Trump plan would cut the top
corporate tax rate from 35 percent to 15 percent.
Owners of pass-through entities (sole
proprietorships, partnerships, and S corporations)
could elect to be taxed at a flat rate of 15 percent
on their pass-through income rather than under
regular individual income tax rates (the top rate
would be 33 percent under the plan, compared
with 39.6 percent under current law). However,
distributions from “large” pass-through
businesses received by owners who elected the
15 percent flat rate would be taxed as dividends.6
CANADA REDUCED INCOME TAX
(CORPORATE/BUSINESS)
• Personal Income Tax and Consumption Tax cuts - $30B was put back into peoples pocket (Source – CBC)
Comment:
• Consumer spending
drives 2/3 of the
economy
• Federal Government
introduced TFSA
• Benefited low
to middle class
• People continue to
saved for retirement
CANADA FINANCIAL RESULTS
• Source – Government of Canada
Comments
• Canada had a surplus of $13B in 2006
• GST went from 7% to 5%
• Personal Tax Rates were cut
• Spending was increase
USA FINANCIAL RESULTS
• Source – The Balance
Comment:
• USA needs to eliminate
their deficit
• Tax cuts will be mean
spending cuts also
must happen
• Trump has put federal
hiring freeze (except
Military
DEPARTMENTAL SPENDING
• US Government
Comment
• All budgets (except
defense) likely need to be
cut by 5-8%)
SUMMARY
• Trump plans to carry forward with tax cuts similar to what CPC did under Harper -
https://www.youtube.com/watch?v=yOl37VcG89c .
• Trump will face pressure to reign in on the government debt including eliminating the budget deficit
• Harper and Martin were able to make cuts due to a budget surpluses. The current government is
running $25B deficits which means either spending cuts are required or tax increases/tax credit
eliminations to balance the budget

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President Donald Trump (USA) will face pressure to cut taxes and eliminate the deficit

  • 1. CANADA AND USA – INCOME TAX COMPARISON BY: PAUL YOUNG CPA, CGA DATE: FEBRUARY 27, 2017
  • 2. BIO – AUTHOR – PAUL YOUNG • Paul Young • CPA, CGA • 15+ years in Corporate Finance • 12+ years in Financial Solution • 8 years in Academia • Blogger on Financial Solutions, Economic Indicators and Government Policies
  • 3. PERSONAL TAX RATES (FEDERAL) • Source – CRA and Tax Policycenter.org
  • 4. CORPORATE TAX RATES (FEDERAL) • Source – CRA and Tax Policycenter.org The basic rate of Part I tax is 38% of your taxable income, 28% after federal tax abatement. After the general tax reduction, the net tax rate is 15%. For Canadian-controlled private corporations claiming the small business deduction, the net tax rate is 10.5%. The revised Trump plan would cut the top corporate tax rate from 35 percent to 15 percent. Owners of pass-through entities (sole proprietorships, partnerships, and S corporations) could elect to be taxed at a flat rate of 15 percent on their pass-through income rather than under regular individual income tax rates (the top rate would be 33 percent under the plan, compared with 39.6 percent under current law). However, distributions from “large” pass-through businesses received by owners who elected the 15 percent flat rate would be taxed as dividends.6
  • 5. CANADA REDUCED INCOME TAX (CORPORATE/BUSINESS) • Personal Income Tax and Consumption Tax cuts - $30B was put back into peoples pocket (Source – CBC) Comment: • Consumer spending drives 2/3 of the economy • Federal Government introduced TFSA • Benefited low to middle class • People continue to saved for retirement
  • 6. CANADA FINANCIAL RESULTS • Source – Government of Canada Comments • Canada had a surplus of $13B in 2006 • GST went from 7% to 5% • Personal Tax Rates were cut • Spending was increase
  • 7. USA FINANCIAL RESULTS • Source – The Balance Comment: • USA needs to eliminate their deficit • Tax cuts will be mean spending cuts also must happen • Trump has put federal hiring freeze (except Military
  • 8. DEPARTMENTAL SPENDING • US Government Comment • All budgets (except defense) likely need to be cut by 5-8%)
  • 9. SUMMARY • Trump plans to carry forward with tax cuts similar to what CPC did under Harper - https://www.youtube.com/watch?v=yOl37VcG89c . • Trump will face pressure to reign in on the government debt including eliminating the budget deficit • Harper and Martin were able to make cuts due to a budget surpluses. The current government is running $25B deficits which means either spending cuts are required or tax increases/tax credit eliminations to balance the budget

Editor's Notes

  1. 1. http://www.taxpolicycenter.org
  2. 1. http://www.taxpolicycenter.org
  3. http://www.cbc.ca/news/business/canadians-pocket-30-billion-from-tax-cuts-in-past-decade-pbo-1.2655522 TFSA - http://business.financialpost.com/personal-finance/tfsa/exclusive-canadians-maxing-out-their-tfsas-from-all-walks-of-life http://www.cbc.ca/news/business/canadians-are-saving-enough-for-retirement-says-c-d-howe-study-1.3100653
  4. 1. https://www.thebalance.com/us-deficit-by-year-3306306