From the Fraser Institute

By Alex Whalen and Jake Fuss

With Major League Baseball’s regular season winding down and NHL training camps starting up, some big-name athletes including Maple Leafs captain John Tavares and former Toronto Blue Jays Josh Donaldson and Jose Bautista are involved in lawsuits with the Canada Revenue Agency. While the specifics of each case differ, the overall theme is the same—when signing their contracts in Toronto, these athletes adopted tax planning strategies to manage Canada’s burdensome tax structure.

One might ask: who cares about the tax plight of multi-millionaire pro athletes? But these high-profile cases underscore Canada’s comparative disadvantage in attracting top performers in all fields.

Similar to professional athletes, other high-skilled individuals including doctors, engineers, scientists and entrepreneurs are more likely than other workers to consider tax rates when choosing where to live and work. By maintaining high tax rates relative to similar jurisdictions, Canada has a harder time attracting and retaining these talented individuals.

And you’re almost guaranteed to face higher tax rates in Canada than in the United States. When it comes to top personal income tax rates, 10 of the top 15 highest-taxed jurisdictions in North America (among 61 provinces and U.S. states) are Canadian including the entire top eight.

In fact, a top performer in Ontario, British Columbia or Quebec faces a marginal tax rate at least 11 percentage points higher than the median U.S. state, and 16 percentage points higher than nine U.S. states (which have no state income tax). For a doctor, entrepreneur, professional athlete or other high-skilled worker, the tax differences between these jurisdictions can be substantial. Not surprisingly, the nine U.S. states with no state tax such as Texas, Florida and Tennessee have become favoured destinations for pro athletes and other top talent.

In addition to hurting Canada’s ability to attract high-skilled individuals, high personal income taxes reduce incentives for Canadians to work, save and invest. For example, higher taxes reduce the income workers take home from each hour worked, so many will choose to work fewer hours, resulting in reduced economic growth and prosperity. And higher taxes reduce savings and investment by consuming larger portions of a worker’s earnings.

High tax rates can also lead to less innovation and entrepreneurship, which limits economic growth and thereby affects all Canadians, not merely the wealthy. These innovators and job creators operate in a global marketplace for talent. Once achieving free agency, the typical hockey or baseball star generally will only have 30 to 32 destinations to choose from, all within North America. In contrast, Canada competes for other types of talent with countries from around the globe, making competitiveness even more important.

Professional athletes have a few things in common with other top performers. They are highly mobile, and all else equal, will move to jurisdictions that allow them to take home the highest possible after-tax earnings. While no Canadians are likely losing any sleep over John Tavares’ tax lawsuit, the broader concern over Canada’s competitiveness should be a top priority for policymakers.

From the Fraser Institute

By Julio Mejía and Elmira Aliakbari

The resulting reduction in global GHG emissions would amount to a mere four-tenths of one per cent (i.e. 0.004 per cent) with virtually no impact on the climate or any detectable environmental, health or safety benefits.

Last year, when the Trudeau government said it would cap greenhouse gas emissions (GHG) from the oil and gas sector at 35 to 38 per cent below 2019 levels by 2030, it claimed the cap will not affect oil and gas production.

But a report by Deloitte, a leading audit and consulting firm, found that the cap (which would go into effect in 2026) will in fact curtail production, destroy jobs and cost the Canadian economy billions of dollars. Under Trudeau’s cap, Canada must curtail oil production by 626,000 barrels per day by 2030 or by approximately 10.0 per cent of the expected production—and curtail gas production by approximately 12.0 per cent.

According to the report’s estimates, Alberta will be hit hardest, with 3.6 per cent less investment, almost 70,000 fewer jobs, and a 4.5 per cent decrease in the province’s economic output (i.e. GDP) by 2040. Ontario will lose more than 15,000 jobs and $2.3 billion from its economy by 2040. And Quebec will lose more than 3,000 jobs and $0.4 billion from its economy during the same period.

Overall, the whole country will experience an economic loss equivalent to 1.0 per cent of GDP, translating into lower wages, the loss of nearly 113,000 jobs and a 1.3 per cent reduction in government tax revenues. Canada’s real GDP growth in 2023 was a paltry 1.1 per cent, so a 1 per cent reduction would be a significant economic loss.

Deloitte’s findings echo previous studies on the effects of Ottawa’s cap. According to a recent economic analysis by the Conference Board of Canada, the cap could reduce Canada’s GDP by up to $1 trillion between 2030 and 2040, eliminate up to 151,000 jobs by 2030, reduce federal government revenue by up to $151 billion between 2030 and 2040, and reduce Alberta government revenue by up to $127 billion over the same period.

Similarly, another recent study published by the Fraser Institute found that an emissions cap on the oil and gas sector would inevitably reduce production and exports, leading to at least $45 billion in lost economic activity in 2030 alone, accompanied by a substantial drop in government revenue.

Crucially, the huge economic cost to Canadians will come without any discernable environmental benefits. Even if Canada were to entirely shut down its oil and gas sector by 2030, thus eliminating all GHG emissions from the sector, the resulting reduction in global GHG emissions would amount to a mere four-tenths of one per cent (i.e. 0.004 per cent) with virtually no impact on the climate or any detectable environmental, health or safety benefits.

Given the sustained demand for fossil fuels, constraining oil and gas production and exports in Canada would merely shift production to other regions, potentially to countries with lower environmental and human rights standards such as Iran, Russia and Venezuela.

The Trudeau government’s proposed GHG cap will severely damage Canada’s economy for virtually no environmental benefit. The government should scrap the cap and prioritize the economic wellbeing of Canadians over policies that only bring pain with no gain.