The Gap has Narrowed — The Myths Remain
New analysis reveals that Ontario’s income tax advantage vs. Quebec is a lot smaller than you might suspect. This is true for a number of reasons:
- Ontario has a lot of hidden income taxes and fees, whereas Quebec does not.
- The 25% top Quebec provincial income tax rate knocks alot of people off their chairs, but it is misleading.
- Quebecers pay 16.5% less Federal Income tax than Canadians do, due to the Federal Abatement.
- Quebec has lowered their taxes in recent years, and many still think back to the high taxes of the 90s.
A Decade of Quebec Tax Cuts
Quebec has been lowering its taxes for almost a decade now:
- Its has virtually eliminated its school tax
- It has lowered its personal income tax rate multiple times, most recently in 2023.
- It has eliminated its health contribution.
Ontario’s Hidden Income Taxes
Ontario taxes look low on paper.
Who wouldn’t want an 11% provincial tax rate?
The Ontario government is good at marketing itself as a low-tax haven, but the truth is that Ontario has alot of hidden income taxes, including:
- A surtax system, which imposes tax on tax and,
- A health premium which can add $600 to $1000 to your total tax bill.
- A low personal amount — Ontarians pay no tax on income up until $11,865 (2024). This is $5000 lower than Quebec. This means that Quebecers get an additional $5000 where they dont pay any provincial taxes, as compared to Ontarians.
So much for the 11% tax rate.
Quebec Is not Very Good at Tax Marketing
Someone fire whoever is responsible for Quebec tax marketing.
On paper, their taxes seem punishingly high. Its not until you dig deeper that you find the truth:
-Quebecers pay up to $750 per year for drug insurance through their taxes, however, if you already have coverage through work, this fee is waived.
-As mentioned, Quebecers dont pay provincial income tax on the first $17,000 of income, much higher than other provinces.
–Quebecers pay 16.5% less Federal income tax because they assume more responsibilities than the other provinces do. (immigration, taxes, pension plan, parental insurance). This is the reason for the seemingly high provincial tax rates.
Maybe though, just maybe…. Quebec doesnt want everyone to know their taxes arent eyewateringly high. (google Quebec immigration reform, and Quebec housing crisis)
Ontario’s Tax Advantage has Disappeared
An analysis using popular tax software has revealed the effective Ontario vs Quebec tax rates have narrowed to around 3% of income in 2023.
For this analysis we’ve created a fictitious guy named Bill Ottega!
In all scenarios Bill has:
- dental/prescription coverage through work,
- paid the maximum in CPP and EI
- contributed $4500 to an RRSP.
We then used professional, CRA certified, 2023 tax software to run the numbers:
Scenario #1:
In 2023, Bill made $100,000 living in Ontario, he now owes $20,151 in income taxes.
In 2023, Bill made $100,000 living in Quebec, he would owe $24,326 in income taxes.
Do you see whats happening here? On paper, Ontario shows a 10% lower tax rate than Quebec, but once all of the fees and calculations are done, its actually only a 4.1% difference for a $100,000 earner. (the 4.1% is additional tax on every dollar, not the difference between totals)
This spread narrows further for low income earners.
Scenario #2:
Bill now makes a 65k income in 2023, in Ontario, and owes $9,441.74 in taxes.
Whereas, if Bill made a 65k income in Quebec, he would owe $11,493.75 in taxes.
Bill would only pay 3.1% more income tax on every dollar earned in Quebec vs Ontario.
But Wait There’s More! Some of the Quebec Amount Owed Isn’t Even Taxes
Its important to note that some of the additional Quebec “taxes owed” here aren’t even really taxes.
For instance, Bill would owe a parental insurance premium as part of these taxes, but he would be entitled to 75% of his pay for up to 10 months of parental leave (with huge sharing bonuses for single mothers or if a spouse takes time off too) Whereas, EI pays only 55%.
Is it worth it? You decide:
The 3-4% higher taxes gets you access to:
- $8.50 child care
- lower housing costs
- lower car insurance rates
- half price university
- a second child benefit payment (yes, thats right)
- lower electricity costs
- and, better parental leave benefits.
There are also drawbacks of course: a very different culture, higher unemployment, language restrictions, more expensive energy products, higher sales tax and lower wages!
Overall, probably a good deal for french-speaking families with employment secured.
In any case, Quebec has been sneakily closing the gap with Ontario. Makes you wonder what their plan is.
