I was reading about tax rates in Canada and didn’t completely understand them.I read about the effective & marginal tax.If one person is working, how would those taxes apply?I read that there is no concept like married filing jointly or separately.Would really appreciate someones input.
Taxes in general are very similar to the Indian system.
The tax rate is regressive (some people call it progressive), the more money you make the larger proportion you’ll pay in taxes.
What is your specify question?
The tax rate increases the more money you make. Why is that regressive? That’s the classic definition of a progressive tax - people who make less will literally have less money to pay.
With a flat tax rate, people who make less money will pay less in taxes. That’s a given.
Regressive taxation penalizes work (it’s a disincentive to make more money) and causes people to find creative ways to reduce their tax burden.
Speaking of glorious oversimplification.
Just because you want to call it “regressive” doesn’t make it a regressive tax. Progressive taxation is “the” technical term. https://en.wikipedia.org/wiki/Progressive_tax
In fact, sales tax is considered regressive, because it is a flat tax, and places a higher burden on lower income earners than higher income earners.
Some societies believe that taking care of your fellow citizens in need is a social duty and makes for an overall happier societies. That’s one of the reasons for taxing people who make more money a bit higher than people who can barely meet their needs with their low income.
If you can afford to find creative ways (legally) to reduce tax burden, where’s the issue in that?
By that logic, shouldn’t people want to pay more tax?
Why then bother reducing or minimizing the tax burden.
That’s exactly why there’s progressive income tax in a lot of developed nations rather than a flat or a real “regressive” tax. Because as a society, the majority decided that a progressive tax is more ethical.
An individual may chose to agree with that thought or not is a different matter - like you clearly disagreeing with this. But that’s okay, as this is a democracy and a space where we can debate ideas without fear of retaliation.
I think you’d be stretching facts if you say that most people support regressive (or progressive taxation as you call it).
Most people don’t know too much about taxes(me included) and just bear with them.
I’m genuinely surprised that people believe that regressive taxation is better than a flat tax. It’s only the uber rich who are generally most aware of the tax policy and often lobby for and dictate how it’s written. And across the board, they support regressive taxation.
The main complaint of the existing system is that the rich don’t pay their fair share and the middle classes are taxed at a disproportionate rate to keep the rich insulated.
The issue about taxing the poor is non existent, you can’t tax someone who doesn’t have any money.
I’m all for basic services for all and for a fair taxation policy, sadly I don’t believe that the regressive policy meets those goals.
Canada’s tax system is similar to the US, there are some differences and the rates are a bit higher. Marginal tax is where you fall in the tax bracket and effective tax is what you end up paying after credits and allowances. Just like in the US.
I used this link (https://neuvoo.ca/tax-calculator/ , I enter annual salary and input “year” in the “Per” option) in the beginning to make sense of the rates and the terminology. Even though I don’t know much about tax code to absolutely vouch for this calculator, it seemed 99.9% close to my actual paycheck, so give it a try.
thanks.I was trying to calculate what our tax rate would be if one person is working.
@spai you can probably post this in this conversation too A tax consultant has offered to answer questions related to Canadian taxes
Here’s what I understand:
Marginal tax means it is based on tax slabs
eg: if your annual income is $100K and if marginal tax rates are like this:
10% on for $20000 ($2000)
20% on next $30000 ($6000)
30% on next $40000 ($12000)
40% on amount greater than that (in this case 40% of $10000 = $4000)
the tax you owe will be $24000, so effective tax rate is 24%.
There is no concept of married filing jointly in Canada, but that can be an advantage in some cases if there’s a huge difference in the income rate between the spouses (I don’t know the specifics, probably a good question to ask a CPA / financial planner).