In a progressive tax system, the tax burden rises as income rises. Progressivity can be assessed by evaluating the share of total income paid by a household in taxes. This figure shows the household tax burden, measured as a share of total income for a range of income groups. This figure does not include transfers to households, such as the federal GST/HST credit or provincial income assistance.
Household Tax Burden: Provincial and Municipal
(Click chart to enlarge)
Nova Scotia’s personal income tax is progressive, as illustrated by the red bars. As income rises, Nova Scotians pay higher tax rates and surtaxes, up to a maximum of 19.25 per cent of income (top statutory rate of 17.5 per cent and 10 per cent surtax).
- Households with the lowest income pay virtually no income taxes. Those with incomes under $20,000 pay less than one per cent of their household income in personal income taxes.
- The personal income tax burden rises as income grows. Households earning over $100,000 pay between 8.7 per cent and 13.4 per cent of their income in personal income taxes.
- The progressivity of the tax system is not measured in the personal income tax system alone. The provincial government also gets significant revenues from consumption taxes, including HST, fuel and tobacco taxes. Property taxes and fees further offset income tax progressivity:
- Because households with higher incomes save a higher share of their income, consumption taxes take up a lower share of their income.
- For example, households with income in excess of $100,000 pay between 2.8 and 4.4 per cent of their total income in sales and excise taxes, compared to over 8 per cent for households with incomes between $10,000 and $20,000.
On balance, Nova Scotia’s progressive personal income tax system more than offsets the regressive nature of consumption taxes. Households earning between $10,000 and $20,000 paid 13 per cent of their income in taxes while households with incomes over $250,000 paid taxes amounting to 18 per cent of their income.
Although the gap in tax burden is 5 per cent of total income, this represents a wide range of absolute taxes paid. Households earning between $10,000 and $20,000 paid under $2,200 per year in taxes while those with income over $250,000 paid almost $80,000.
The federal government also levies progressive personal income taxes that more than offset its regressive consumption taxes. The figure below shows that the total household tax structure (federal, provincial, and municipal taxes) in Nova Scotia is more progressive than the provincial tax system alone. Progressive federal income and payroll taxes are much more substantial than regressive federal sales and excise taxes.
Household Tax Burden: Federal, Provincial, and Municipal
