Marginal Tax Rates of Over 100%

RE: Who Pays the Highest Marginal Tax Rates?

I never did find confirmation of the statistics I recalled seeing in 2000, for "single-mothers with 2 or more children, earning between $20,000-$40,000 a year" marginal tax rates in Canada exceeded 80%. I did, however, find a recent editorial that claims even higher marginal tax rates in the Great White North:

A front-page case study highlighted in the Toronto Star this week helps illuminate the problem. That example profiled the plight of an unemployed single mother, with two children, making roughly $14,000 from welfare. Then comes a chance for the mother to take a $14,000/year part-time job. One of the teenage children also gets a part-time job, as well as a bursary-subsidized spot at a local university. Government policy should be encouraging such opportunities: Employment and education are both paths out of poverty and welfare-dependency. But as the Star's numbers show, the family's net income barely rises at all as a result of these changes -- flat-lining near the $14,000 level even though its nominal income has risen to $31,000. That's because the government claws back so many benefits as soon as the family starts climbing the economic ladder.

This is a problem all over the country, not just in Ontario. On Nov. 22, there appeared on this page an op-ed by Jeremy Leonard, Christopher Ragan and France St-Hilaire, co-editors of A Canadian Priorities Agenda: Policy Choices to Improve Economic and Social Well-Being, published last month by the Institute for Research on Public Policy. As the authors wrote:

"Effective marginal tax rates are remarkably high at very low levels of income. In fact, due to the interaction of various transfer programs, the effective tax rates are well in excess of 100% for certain annual income levels between $10,000 and $20,000. At income levels around $30,000, the effective marginal tax rate is about 80%. For any low-income Canadians facing marginal tax rates like this, what is the incentive to work harder and earn more?"

The full editiorial here: Destroy Canada's welfare trap.