01/11/2019

Canada's Laffer Curve Lesson: Government Collects Less Revenue From High-Income Earners After Trudeau Tax Hike

Daniel J. Mitchell, Foundation for Economic Education

wrote yesterday about a handful of strange legal developments in Canada.

In a display of balance, however, I noted in my conclusion that in recent decades, Canada has been “very sensible” with regard to economic issues (spending restraintwelfare reformcorporate tax reformbank bailoutsregulatory budgeting, the tax treatment of savingschool choice, and privatization of air traffic control).

But “very sensible” is not the same as “totally sensible.” Especially not if you count recent years.

The nation’s current top politician, Justin Trudeau (a.k.a., Prime Minister Zoolander), increased the top tax rate from 29 percent to 33 percent after taking office in late 2015.

It appears, though, that he wasn’t aware of a concept known as the Laffer Curve (or, like some folks on the left, maybe he simply didn’t care).

In the real world, however, it turns out that increasing tax rates is not the same as increasing tax revenue.

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