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Canadians Now Paying Lower Income Taxes Than Americans, OECD Data Shows

And families with children are paying much, much less than Americans.
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This story was originally published on May 3, 2018.

Here’s an unexpected factoid: The tax rate for a married couple with one income and two kids in the U.S. is 12 times as high as the tax rate on the same family in Canada.

No, that’s not a typo.

It’s among new data from the OECD, which shows that the old belief Canadians are a higher-taxed people than Americans is no longer true.

The OECD’s study, “Taxing Wages 2018,” found that the employee net average tax rate for a single person in Canada with no children was 22.8 per cent in 2017, the 11th lowest among 35 OECD countries. The U.S. clocked in at 26.1 per cent.

The OECD’s estimates take into account federal and provincial or state taxes, as well as social security contributions and money returned in the form of family benefits.

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The difference is much more extreme when it comes to households with children, thanks to the Liberals' expanded child benefit.

"The employee net average tax rate for an average married worker with two children in Canada was reduced to 1.2 per cent in 2017, which is the 32nd lowest in the OECD," the report noted.

In other words, an average one-income household with two children now keeps 98.8 per cent of their gross income, once the child benefit is factored in. In the U.S., the same family would pay 14.2 per cent in taxes, a tax rate some 12 times higher than in Canada.

It's worth noting, though, that the child benefit varies greatly by income, and higher-income families are likely to see very little in payments, while some lower-income families may get more in child benefits than they pay in taxes.

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Back In 2000, that same one-income, two-child family would have paid 23.1 per cent in taxes in Canada, compared to 21.2 per cent in the U.S. How times have changed.

The numbers are all the more remarkable when considering how much more value for money Canadian wage earners get for their taxes than Americans — our universal health care system being one obvious example.

Of course, the U.S. taxpayer is footing the bill for some things Canadians don't, such as the world's most expensive military.

And these days, the Canadian business community is worried that our corporate tax rates are no longer competitive with the U.S., after the large tax reform package passed by the U.S. Congress late last year.

But we can certainly take pride in our personal tax rates. Canada's high-tax monster has been slain.

Watch: Canada Revenue Agency is coming for your undeclared tips

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