Marginal Tax Rates: BC 2012

E&Y have analyzed British Columbia tax rates as of 2012-1-15 and we may draw some conclusions from these data:

Investors Taxable Income Marginal Rate on Interest Marginal Rate on Dividends Equivalency Factor
Widows & Orphans $30,000 23.26% 0.00% 1.30
Professionals $75,000 32.50% 10.32% 1.33
Plutocrats $150,000 43.70% 25.78% 1.32

Equivalency factors have increased for Widows & Orphans and declined for Professionals and Plutocrats since my 2011 post on this topic.

Two nuances should be noted. Firstly, E&Y appears to have put a floor of 0.00% on the published marginal tax rate for dividends; in fact, the tax on dividends can be negative if the taxpayer has other income available to soak up the excess dividend tax credit. This will increase the equivalency factor for “Widows & Orphans”.

Secondly, if the taxpayer is subject to OAS clawback, the equivalency factor will decline by about 0.1. It should be noted that this figure is an extremely rough estimate and is based solely on the direct income tax effect – there may be other net-income-tested benefits to the taxpayer, such as drug plans, which will exacerbate the decline.

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