Economy
High taxes hurt Canada’s ability to attract talent

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.
Authors:
Business
It Took Trump To Get Canada Serious About Free Trade With Itself

From the Frontier Centre for Public Policy
By Lee Harding
Trump’s protectionism has jolted Canada into finally beginning to tear down interprovincial trade barriers
The threat of Donald Trump’s tariffs and the potential collapse of North American free trade have prompted Canada to look inward. With international trade under pressure, the country is—at last—taking meaningful steps to improve trade within its borders.
Canada’s Constitution gives provinces control over many key economic levers. While Ottawa manages international trade, the provinces regulate licensing, certification and procurement rules. These fragmented regulations have long acted as internal trade barriers, forcing companies and professionals to navigate duplicate approval processes when operating across provincial lines.
These restrictions increase costs, delay projects and limit job opportunities for businesses and workers. For consumers, they mean higher prices and fewer choices. Economists estimate that these barriers hold back up to $200 billion of Canada’s economy annually, roughly eight per cent of the country’s GDP.
Ironically, it wasn’t until after Canada signed the North American Free Trade Agreement that it began to address domestic trade restrictions. In 1994, the first ministers signed the Agreement on Internal Trade (AIT), committing to equal treatment of bidders on provincial and municipal contracts. Subsequent regional agreements, such as Alberta and British Columbia’s Trade, Investment and Labour Mobility Agreement in 2007, and the New West Partnership that followed, expanded cooperation to include broader credential recognition and enforceable dispute resolution.
In 2017, the Canadian Free Trade Agreement (CFTA) replaced the AIT to streamline trade among provinces and territories. While more ambitious in scope, the CFTA’s effectiveness has been limited by a patchwork of exemptions and slow implementation.
Now, however, Trump’s protectionism has reignited momentum to fix the problem. In recent months, provincial and territorial labour market ministers met with their federal counterpart to strengthen the CFTA. Their goal: to remove longstanding barriers and unlock the full potential of Canada’s internal market.
According to a March 5 CFTA press release, five governments have agreed to eliminate 40 exemptions they previously claimed for themselves. A June 1 deadline has been set to produce an action plan for nationwide mutual recognition of professional credentials. Ministers are also working on the mutual recognition of consumer goods, excluding food, so that if a product is approved for sale in one province, it can be sold anywhere in Canada without added red tape.
Ontario Premier Doug Ford has signalled that his province won’t wait for consensus. Ontario is dropping all its CFTA exemptions, allowing medical professionals to begin practising while awaiting registration with provincial regulators.
Ontario has partnered with Nova Scotia and New Brunswick to implement mutual recognition of goods, services and registered workers. These provinces have also enabled direct-to-consumer alcohol sales, letting individuals purchase alcohol directly from producers for personal consumption.
A joint CFTA statement says other provinces intend to follow suit, except Prince Edward Island and Newfoundland and Labrador.
These developments are long overdue. Confederation happened more than 150 years ago, and prohibition ended more than a century ago, yet Canadians still face barriers when trying to buy a bottle of wine from another province or find work across a provincial line.
Perhaps now, Canada will finally become the economic union it was always meant to be. Few would thank Donald Trump, but without his tariffs, this renewed urgency to break down internal trade barriers might never have emerged.
Lee Harding is a research fellow with the Frontier Centre for Public Policy.
Alberta
Low oil prices could have big consequences for Alberta’s finances

From the Fraser Institute
By Tegan Hill
Amid the tariff war, the price of West Texas Intermediate oil—a common benchmark—recently dropped below US$60 per barrel. Given every $1 drop in oil prices is an estimated $750 million hit to provincial revenues, if oil prices remain low for long, there could be big implications for Alberta’s budget.
The Smith government already projects a $5.2 billion budget deficit in 2025/26 with continued deficits over the following two years. This year’s deficit is based on oil prices averaging US$68.00 per barrel. While the budget does include a $4 billion “contingency” for unforeseen events, given the economic and fiscal impact of Trump’s tariffs, it could quickly be eaten up.
Budget deficits come with costs for Albertans, who will already pay a projected $600 each in provincial government debt interest in 2025/26. That’s money that could have gone towards health care and education, or even tax relief.
Unfortunately, this is all part of the resource revenue rollercoaster that’s are all too familiar to Albertans.
Resource revenue (including oil and gas royalties) is inherently volatile. In the last 10 years alone, it has been as high as $25.2 billion in 2022/23 and as low as $2.8 billion in 2015/16. The provincial government typically enjoys budget surpluses—and increases government spending—when oil prices and resource revenue is relatively high, but is thrown into deficits when resource revenues inevitably fall.
Fortunately, the Smith government can mitigate this volatility.
The key is limiting the level of resource revenue included in the budget to a set stable amount. Any resource revenue above that stable amount is automatically saved in a rainy-day fund to be withdrawn to maintain that stable amount in the budget during years of relatively low resource revenue. The logic is simple: save during the good times so you can weather the storm during bad times.
Indeed, if the Smith government had created a rainy-day account in 2023, for example, it could have already built up a sizeable fund to help stabilize the budget when resource revenue declines. While the Smith government has deposited some money in the Heritage Fund in recent years, it has not created a dedicated rainy-day account or introduced a similar mechanism to help stabilize provincial finances.
Limiting the amount of resource revenue in the budget, particularly during times of relatively high resource revenue, also tempers demand for higher spending, which is only fiscally sustainable with permanently high resource revenues. In other words, if the government creates a rainy-day account, spending would become more closely align with stable ongoing levels of revenue.
And it’s not too late. To end the boom-bust cycle and finally help stabilize provincial finances, the Smith government should create a rainy-day account.
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