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Low and middle income Canadians hit hardest by high marginal effective tax rates

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From the Fraser Institute

By Philip Bazel

A new study published by the Fraser Institute today finds that Canadian families and individuals with annual incomes between $30,000 and $60,000 face marginal effective tax rates near or above 50%.

Among the provinces, BC has the lowest tax rates of 38%.

Ontario has a rate of 50% – and high-income families at $300,000+ are taxed lower at 44%.

Families with modest income brackets consistently face disproportionately high marginal effect tax rates, raising questions of fairness and efficiency in the tax and transfer system.

Dig into the numbers and see how your province placed here.

Canadian families and individuals with annual incomes between $30,000 and $60,000 face marginal effective tax rates near or above 50 per cent, finds a new study published by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“Canadian families with modest incomes face high marginal effective tax rates, often higher rates than Canadians in top income tax brackets,” said Jake Fuss, director of fiscal studies at the Fraser Institute, which published Marginal Effective Tax Rates for Working Families in Canada by Philip Bazel, an associate at the School of Public Policy at the University of Calgary.

The marginal effective tax rate (METR) measures the personal income taxes paid (federal and provincial) and the reductions in government benefits, resulting from earning an extra dollar. For example, the Canada Child Benefit, a monthly payment, is reduced as family income increases. In other words, the effective tax rate is the combination of taxes you pay and benefits you lose as you make more money.

Crucially, across the provinces, individuals and families with relatively modest incomes face the highest rates. This unfortunately creates a disincentive for earning additional income, as the financial benefits are significantly offset by increased taxes and/or reduced government benefits.

Canadian families with modest incomes, particularly those earning between $30,000 and $60,000, face the highest marginal effective tax rates. For example, families earning a household income of $60,000 are subject to an effective tax rate of 50 per cent or higher in every province. In Quebec, the METR is as high as 67 per cent at this income level.

Among provinces, BC has the lowest rate (38 per cent) averaging across the $30,000 to $60,000 bracket. Ontario’s rate for the $30,000 to $60,000 bracket is 6 percentage points higher (50 per cent) than high-income families at $300,000 or higher (44 per cent).

“Families with modest income brackets consistently face disproportionately high METRs, raising questions of fairness and efficiency in the tax and transfer system,” Bazel said.

“These findings highlight the need to prioritize METR reductions for low-income families.”

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Agriculture

Canada’s air quality among the best in the world

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From the Fraser Institute

By Annika Segelhorst and Elmira Aliakbari

Canadians care about the environment and breathing clean air. In 2023, the share of Canadians concerned about the state of outdoor air quality was 7 in 10, according to survey results from Abacus Data. Yet Canada outperforms most comparable high-income countries on air quality, suggesting a gap between public perception and empirical reality. Overall, Canada ranks 8th for air quality among 31 high-income countries, according to our recent study published by the Fraser Institute.

A key determinant of air quality is the presence of tiny solid particles and liquid droplets floating in the air, known as particulates. The smallest of these particles, known as fine particulate matter, are especially hazardous, as they can penetrate deep into a person’s lungs, enter the blood stream and harm our health.

Exposure to fine particulate matter stems from both natural and human sources. Natural events such as wildfires, dust storms and volcanic eruptions can release particles into the air that can travel thousands of kilometres. Other sources of particulate pollution originate from human activities such as the combustion of fossil fuels in automobiles and during industrial processes.

The World Health Organization (WHO) and the Canadian Council of Ministers of the Environment (CCME) publish air quality guidelines related to health, which we used to measure and rank 31 high-income countries on air quality.

Using data from 2022 (the latest year of consistently available data), our study assessed air quality based on three measures related to particulate pollution: (1) average exposure, (2) share of the population at risk, and (3) estimated health impacts.

The first measure, average exposure, reflects the average level of outdoor particle pollution people are exposed to over a year. Among 31 high-income countries, Canadians had the 5th-lowest average exposure to particulate pollution.

Next, the study considered the proportion of each country’s population that experienced an annual average level of fine particle pollution greater than the WHO’s air quality guideline. Only 2 per cent of Canadians were exposed to fine particle pollution levels exceeding the WHO guideline for annual exposure, ranking 9th of 31 countries. In other words, 98 per cent of Canadians were not exposed to fine particulate pollution levels exceeding health guidelines.

Finally, the study reviewed estimates of illness and mortality associated with fine particle pollution in each country. Canada had the fifth-lowest estimated death and illness burden due to fine particle pollution.

Taken together, the results show that Canada stands out as a global leader on clean air, ranking 8th overall for air quality among high-income countries.

Air Quality infographic

Canada’s record underscores both the progress made in achieving cleaner air and the quality of life our clean air supports.

Annika Segelhorst

Junior Economist

Elmira Aliakbari

Director, Natural Resource Studies, Fraser Institute
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espionage

Western Campuses Help Build China’s Digital Dragnet With U.S. Tax Funds, Study Warns

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Sam Cooper's avatar Sam Cooper

Shared Labs, Shared Harm names MIT, Oxford and McGill among universities working with Beijing-backed AI institutes linked to Uyghur repression and China’s security services.

Over the past five years, some of the world’s most technologically advanced campuses in the United States, Canada and the United Kingdom — including MIT, Oxford and McGill — have relied on taxpayer funding while collaborating with artificial-intelligence labs embedded in Beijing’s security state, including one tied to China’s mass detention of Uyghurs and to the Ministry of Public Security, which has been accused of targeting Chinese dissidents abroad.

That is the core finding of Shared Labs, Shared Harm, a new report from New York–based risk firm Strategy Risks and the Human Rights Foundation. After reviewing tens of thousands of scientific papers and grant records, the authors conclude that Western public funds have repeatedly underwritten joint work between elite universities and two Chinese “state-priority” laboratories whose technologies drive China’s domestic surveillance machinery — an apparatus that, a recent U.S. Congressional threat assessment warns, is increasingly being turned outward against critics in democratic states.

The key Chinese collaborators profiled in the study are closely intertwined with China’s security services. One of the two featured labs is led by a senior scientist from China Electronics Technology Group Corporation (CETC), the sanctioned conglomerate behind the platform used to flag and detain Uyghurs in Xinjiang; the other has hosted “AI + public security” exchanges with the Ministry of Public Security’s Third Research Institute, the bureau responsible for technical surveillance and digital forensics.

The report’s message is blunt: even as governments scramble to stop technology transfer on the hardware side, open academic science has quietly been supplying Chinese security organs with new tools to track bodies, faces and movements at scale.

It lands just as Washington and its allies move to tighten controls on advanced chips and AI exports to China. In the Netherlands’ Nexperia case, the Dutch government invoked a rarely used Cold War–era emergency law this fall to take temporary control of a Chinese-owned chipmaker and block key production from being shifted to China — prompting a furious response from Beijing, and supply shocks that rippled through European automakers.

“The Chinese Communist Party uses security and national security frameworks as tools for control, censorship, and suppressing dissenting views, transforming technical systems into instruments of repression,” the report says. “Western institutions lend credibility, knowledge, and resources to Chinese laboratories supporting the country’s surveillance and defense ecosystem. Without safeguards … publicly funded research will continue to support organizations that contribute to repression in China.”

Cameras and Drones

The Strategy Risks team focuses on two state-backed institutes: Zhejiang Lab, a vast AI and high-performance computing campus founded by the Zhejiang provincial government with Alibaba and Zhejiang University, and the Shanghai Artificial Intelligence Research Institute (SAIRI), now led by a senior CETC scientist. CETC designed the Integrated Joint Operations Platform, or IJOP — the data system that hoovered up phone records, biometric profiles and checkpoint scans to flag “suspicious” people in Xinjiang.

United Nations investigators and several Western governments have concluded that IJOP and related systems supported mass surveillance, detention and forced-labor campaigns against Uyghurs that amount to crimes against humanity.

Against that backdrop, the scale of Western collaboration is striking.

Since 2020, Zhejiang Lab and SAIRI have published more than 11,000 papers; roughly 3,000 of those had foreign co-authors, many from the United States, United Kingdom, and Canada. About 20 universities are identified as core collaborators, including MIT, Stanford, Harvard, Princeton, Carnegie Mellon, Johns Hopkins, UC Berkeley, Oxford, University College London — and Canadian institutions such as McGill University — along with a cluster of leading European technical universities.

Among the major U.S. public funders acknowledged in these joint papers are the National Science Foundation (NSF), the National Institutes of Health (NIH), the Office of Naval Research (ONR), the Defense Advanced Research Projects Agency (DARPA) and the Department of Transportation. For North America, the warning is twofold: U.S. and Canadian universities are far more entangled with China’s security-linked AI labs than most policymakers grasp — and existing “trusted research” frameworks, built around IP theft, are almost blind to the human-rights risk.

In one flagship example, Zhejiang Lab collaborated with MIT on advanced optical phase-shifting — a field central to high-resolution imaging systems used in satellite surveillance, remote sensing and biometric scanning. The paper cited support from a DARPA program, meaning U.S. defense research dollars effectively underwrote joint work with a Chinese lab that partners closely with military universities and the CETC conglomerate behind Xinjiang’s IJOP system.

Carnegie Mellon projects with Zhejiang Lab focused on multi-object tracking and acknowledged funding from the National Science Foundation and the U.S. Office of Naval Research. Multi-object tracking is a backbone technology for modern surveillance — allowing cameras and drones to follow multiple people or vehicles across crowds and city blocks. “In the Chinese context,” the report notes, such capabilities map naturally onto “public security applications such as protest monitoring,” even when the academic papers present them as neutral advances in computer vision.

The report also highlights Zhejiang Lab’s role as an international partner in CAMERA 2.0, a £13-million U.K. initiative on motion capture, gait recognition and “smart cities” anchored at the University of Bath, and its leadership in BioBit, a synthetic-biology and imaging program whose advisory board includes University College London, McGill University, the University of Glasgow and other Western campuses.

Meanwhile, SAIRI has quietly become a hub for AI that blurs public-security, military and commercial lines.

Established in 2018 and run since 2020 by CETC academician Lu Jun — a designer of China’s KJ-2000 airborne early-warning aircraft and a veteran of command-and-control systems — SAIRI specializes in pose estimation, tracking and large-scale imaging.

Under Lu, the institute has deepened ties with firms already sanctioned by Washington for their roles in Xinjiang surveillance. In 2024 it signed cooperation agreements with voice-recognition giant iFlytek and facial-recognition champion SenseTime, as well as CloudWalk and Intellifusion, which market “smart city” policing platforms.

SAIRI also hosted an “AI + public security” exchange with the Ministry of Public Security’s Third Research Institute — the bureau responsible for technical surveillance and digital forensics — and co-developed what Chinese media billed as the country’s first AI-assisted shooting training system. That platform, nominally built for sports, was overseen by a Shanghai government commission that steers AI into defense and public-security applications, raising the prospect of its use in paramilitary or police training.

Outside the lab, MPS officers have been charged in the United States with running online harassment and intimidation schemes targeting Chinese dissidents, and MPS-linked “overseas police service stations” in North America and Europe have been investigated for pressuring exiles and critics to return to China.

Meanwhile, Radio-Canada, drawing on digital records first disclosed to Australian media in 2024 by an alleged Chinese spy, has reported new evidence suggesting that a Chinese dissident who died in a mysterious kayaking accident near Vancouver was being targeted for elimination by MPS officers and agents embedded in a Chinese conglomerate that the U.S. Treasury accuses of running a money-laundering and modern-slavery empire out of Cambodia.

The new reporting focuses on a former undercover agent for Office No. 1 of China’s Ministry of Public Security — the police ministry at the core of so-called “CCP police stations” in global and Canadian cities, and reportedly tasked with hunting dissidents abroad.

Taken together, cases of alleged Chinese “police station” networks operating globally, new U.S. Congressional reports on worldwide threats from the Chinese Communist Party, and the warnings in Shared Labs, Shared Harm suggest that Western universities are not only helping to build China’s domestic repression apparatus with U.S. taxpayer funds, but may also be contributing to global surveillance tools that can be paired with Beijing’s operatives abroad.

To counter this trend, the paper urges a reset in research governance: broaden due diligence to weigh human-rights risk, mandate transparency over all international co-authorships and joint labs, condition partnerships with security-linked institutions on strict safeguards and narrow scopes of work, and strengthen university ethics bodies so they take responsibility for cross-border collaborations.

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