Taxing for Growth: A close look at tax policy in Ontario

Released October 2013

Ontario has improved its tax system markedly in recent years by introducing the harmonized sales tax, phasing out the capital tax, and lowering corporate tax rates. However, many changes can still be made that would benefit individuals, businesses, and government. In Taxing for growth: A close look at tax policy in Ontario, the Institute picks up on its previous recommendations for tax reform in Ontario and examines current policy to identify ways Ontario can create a tax system that spurs growth, investment, and competitiveness.

The Institute defines three goals for smart taxation: equity, efficiency, and effectiveness. A smart tax system ensures that taxes are proportional to one’s ability to pay and minimize economic distortions. A smart tax system also rewards actions that benefit society, such as investments in R&D or education, and discourages actions that have a hidden social cost, like smoking or pollution.

In recent years, Ontario has expanded the availability of tax credits and deductions for individuals and businesses. Many of these are inequitable, inefficient, and ineffective. Moreover, they often fail to accomplish their intended benefits and cost the government billions of dollars in lost revenue every year.

With greater consideration of the broader effects of current tax measures, Ontario can ensure it rewards the right actions and puts more money back into the pockets of people who need it. By following the Institute’s recommended changes to tax policy, the federal and provincial governments can save billions of dollars per year, which can be re-allocated toward more productive uses.

Topics: Economic policy, growth, and strategy