Could Ontario Follow Massachussets' Bid to End Income Tax?

June 2, 2008 by Paul McKeever

Carla Howell On May 22, 2008, the Western Standard reported that the Center for Small Government, for the second time since 2002, is trying to introduce a ballot initiative to end income taxation in the State of Massachussets. In 2002, 45 percent of the state voted to scrap the state’s income tax. With the figures for early 2008 show similar levels of support, the collectivists – this time – are spending big money to fight the elimination of taxation.

In the comments to the Western Standard story, Anonymous noted that Massachusset’s state revenue would drop only 39% were the income tax to be scrapped. He/she asked others to do the math for Canada and its provinces. I posted the following, in reply:

Here’s the math for Ontario (based on actual 2006-07 figures; see the 2008 Ontario budget).

REVENUES

1. Ontario’s total provincial tax revenue (including r.s.t. etc.) = $64,310M

2. Federal tax revenues transferred to Ontario = $14,036M

3. Income from government business enterprises = $4,196M

4. Other non-tax revenue = $7,855M

TOTAL PROVINCIAL REVENUE = $90,397M

Now, in Ontario, income taxation is split into four main, separate taxes (first number in parentheses represents percentage of total provincial revenue; second number in parentheses represents percentage of provincial income tax revenue):

i) Personal Income Tax: $23,655M (26% / 57%)
ii) Corporations Tax: $10,845M (12% / 26%)
iii) Employer Health Tax: $4,371M ( 5% / 11%)
iv) Ontario Health Premium: $2,589M ( 3% / 6%)
TOTAL PROVINCIAL INCOME TAX $41,460M (46%)

Ontario’s major expense is Health Care: approx. $40,400M (approximately 97% of Provincial Income Tax Revenues; approximately 63% of total Provincial Tax revenues of all kinds; and approximately 42% of total provincial revenues).

The relationship between total income taxes and total health expenditures is pretty reliable. Have a look at recent budgets. This suggests: Ontario’s policy is to finance socialized health care with income taxes. If that’s correct, why income taxes? Because, unlike retail sales taxes, income taxes you can impose PROGRESSIVE RATE STRUCTURES on income taxes. So: the philosophy is that the more you make, the more peoples’ health care you should pay for.

From each according to his ability, to each according to his need.

One quick note about my figures:

The Health Care figures are drawn solely from 2008-09 projections. The reason is that it is not clear, looking at the tables, exactly what parts are considered “health care”. The health “sector” is said to have a $40.4B budget for 2008-09, so I’m using that figure. The 42% figure means: 42% of predicted 2008-09 revenue. That’s probably about as accurate and as current as you can get with the budget info provided.

Above, the percentage of provincial income tax, and of provincial taxes, spent upon health care involved a comparison of 2008-09 health care ($40.4B) to 2006-07 income tax and provincial tax revenues. Note that that’s not really comparing apples to apples. If we use the 2008-09 revenue figures for provincial income taxes, we have revenues of $45,140M, such that health represents 89% of provincial income taxes. If we use 2008-09 revenue figures for total provincial taxation, we have revenues of $68,975M, such that health represents 59% of total provincial tax revenues…that’s about the same percentage as it has been over the last few years.