Last month, the Alberta government released their 2021–2022 budget.
In the new budget, personal income tax will make up about 26.7% of all government revenue. In last year’s budget, it made up 25.1% of all government revenue. In the UCP’s first year, it was supposed to be 23.97% of all revenue—it ended up being 24.3%. It was 23.92% in the NDP’s last budget.
So, it seems that with every budget, the UCP government expects those of paying personal income tax to bear an ever-increasing share of the total tax burden. In the meantime, they cut corporate income tax by 33%.
I was curious how this compared to the personal income tax information of other provinces, and I discovered some interesting information.
First, Alberta’s personal income tax revenue makes up the third highest proportion of total revenue among all the provinces. Only BC and Québec are higher.
And that made me wonder how the actual tax rates compared between the 10 provinces.
Keep in mind that each province has a unique combination of tax rates and tax brackets, so I decided to compare the bottom tax rate and cuttoff and the top tax rate and cutoff.
Let’s start with the tax rates:
Here, we see that Alberta has the 4th highest tax bracket in the country for its lowest tax bracket. There are 6 other provinces that charge under 10% income tax on their lowest tax bracket, and 2 of them have a rate that’s virtually half of Alberta’s.
Here, we see it’s the other way around for the top rate. Alberta has the 4th lowest personal income tax rate on the top bracket among all 10 provinces.
Not only that, but 2 of the 3 provinces (Manitoba and Québec) that had rates for the bottom bracket that were higher than Alberta’s also had rates for the top bracket that were higher than Alberta’s.
In other words, only 1 province had a bottom tax bracket rate higher than Alberta’s but a top bracket rate lower than Alberta’s.
Now onto the cutoffs.
So, this was a bit of a shock.
Alberta has the highest income cutoff between its first and second tax brackets, compared to all other provinces. It’s not just the highest though: it’s, like really high.
Currently, it’s $131,220. No other province has a income cutoff on their bottom bracket that is above $100,000. Heck, it’s not even above $50,000 for any of them.
The province with the 2nd highest cutoff is Saskatchewan, at $45,225. Alberta’s bottom bracket cutoff is nearly triple that of the second highest cutoff. And it’s nearly 4.5 times higher than the lowest one.
The national non-Alberta average for the bottom bracket income cutoff is $39,170 and the median is $41,725. That means Alberta’s cutoff is more than triple that of both the national average and the national median.
Once again, Alberta has the highest income cutoff for their top personal income tax bracket. Theirs is the only one above $300,000 and one of only 2 that were above $200,000.
The non-Alberta average is $139,096 and the median is $139,607, which means that Alberta’s top bracket cutoff is more than double that of both the national average and the national median.
What this means is that the more money you make in Alberta, the better deal you get on your personal income tax, when compared to other provinces.
For example, if you make any $50,000, you’d be in the second tax bracket in 9 of Canada’s 10 provinces. In Alberta, you’d still be in the bottom bracket. Heck, you’d be in the bottom bracket still even if you made $100,000 a year.
If you make $200,000, you’d be in the top bracket in 8 of the 10 provinces. Not in Alberta. You’d still be in the next lowest bracket. In fact, you wouldn’t bump up into the top bracket even if you made $300,000.
This is pretty good news if you make bank in Alberta. But it’s not that great if you’re poor.
Minimum wage in Alberta works out to be about $31,200 (if you’re not a teenager). Your income tax rate is 10%, the same as someone who makes four times what you do. Plus, in all but 4 other provinces, your rate would be lower than what it is now here in Alberta.
Literally, someone who makes $63 an hour pays the same personal income tax rate as someone who makes $15 an hour.
That’s the Alberta Advantage.