Canada’s top 1% collected more than 11% of the country’s income in 2015

It's a good life at the top. Getty Images

The share of income flowing to the top one per cent of Canadian tax filers increased by almost one percentage point between 2014 and 2015, the first increase since 2006, Statistics Canada said on Wednesday.

Canadians in the top one per cent of Canada’s income ladder held 11.2 per cent of the nation’s total income in 2015, up from 10.3 per cent in 2014. And almost all of that increase was thanks to dividends from corporations rather than bigger paycheques.

The results are “surprising,” said Stephen Gordon, professor of economics at Université Laval and frequent commentator on Canada’s income trends.

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Winner and losers

Canadians across the income spectrum saw healthy gains in the period, the data shows, but not everyone benefited equally.

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Those in the bottom half of the income distribution saw a gain of 3.4 per cent, well ahead of inflation, which went up around one per cent over the period. The share of national income accruing to this group also held steady, at around 17 per cent.

But that pales compared to the 5.7 per cent increase registered by the top one per cent, with the median income for the group rising to $331,100.

Canadians with income between the national median ($33,400 in 2015) and the top 10 per cent seem to have seen the smallest gains, said Gordon.

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Those making just enough to rank in the top 10 per cent of filers saw an increase of just 1.5 per cent between 2014 and 2015, from $91,400 to $92,800. That was just above the pace of inflation.

The share of income going to tax filers from the 51st to 99th percentiles of the income distribution shrunk by 1.2 percentage points, StatsCan said.

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WATCH: Here are several middle class incomes in cities across the country, according to Statistics Canada

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Middle class incomes in cities across the country

Bump in top incomes could be reaction to threat of higher taxes

If Canada’s top one per cent received over 11 per cent of the national income in 2015, it also paid a hefty chunk of the country’s tax bill. The group accounted for over 22 per cent of the income taxes paid by all tax filers, according to Statistic Canada.

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And it was perhaps an effort to minimize taxes that explains some of the large income boost seen by these Canadians between 2014 and 2015.

In the years prior to 2006, the share of income held by the top one per cent had been growing mostly because Canada’s richest income filers were earning more.

“The story of the top one per cent had been […] people working for a living,” said Gordon.

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But between 2014 and 2015, a whopping two-thirds of the increase in the size of the national income pie going to the top one per cent came from dividends, money that corporations pay out to shareholders out of their profits.

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It’s not clear what drove the increase in dividend income, but one hypothesis is that company owners opted to pay themselves generous dividends in 2015. This would allow them to declare a lower income in 2016, minimizing the hit from the Liberals’ planned tax increase on high incomes, which kicked in on Jan. 1, 2016.

While Ottawa reduced the marginal tax rate for incomes between $45,282 to $90,563, it also created a new tax bracket for incomes over $200,000.

“The top marginal tax rate in Ontario went up to almost 54 per cent in 2016. A 2015 tax planning strategy was to take out dividends before the rates went up,” Toronto-based tax lawyer David Rotfleisch told Global News via email.

Others in other provinces may have done the same.

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Ontario and B.C. saw the biggest increase of one-percenters

Wondering where all those top-earners live? The majority, by far is in Ontario, where they numbered over 110,000 in 2015. In second place comes Alberta (65,000) while British Columbia (31,000) is third.

But while Ontario and B.C. saw the ranks of their resident one-percenters increase the fastest between 2014 and 2015, Alberta was the only province to see a significant decline.

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READ MORE: Here are the provinces with the highest and lowest disposable income growth, according to StatsCan

Much of the increase in Ontario and B.C. was concentrated in cities. Vancouver alone accounted for a massive 84 percent of the increase in top one per cent of tax filers in B.C.

In Ontario, Toronto takes credit for 42 per cent of the increase, followed by Hamilton (10 per cent), the Kitchener–Cambridge–Waterloo area (8 per cent), and Oshawa (7 per cent).

Contrast that with Alberta, where the number of Canadians with incomes high enough to make it into the top one per cent shrank by 3,400, as the impact of lower oil prices started sweeping the province. It was the largest yearly decline since 1987.

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