Canada's Laffer Curve Lesson: Government Collects Less Revenue from High-Income Earners after Trudeau Tax Hike

Trudeau’s tax hike was a big mistake. The only tangible results are that the private sector is now smaller and the country is less competitive.

by Daniel J. Mitchell
July 24, 2019

I wrote yesterday about a handful of strange legal developments in Canada.

In a display of balance, however, I noted in my conclusion that in recent decades, Canada has been “very sensible” with regard to economic issues (spending restraint, welfare reform, corporate tax reform, bank bailouts, regulatory budgeting, the tax treatment of saving, school choice, and privatization of air traffic control).

But “very sensible” is not the same as “totally sensible.” Especially not if you count recent years.

The nation’s current top politician, Justin Trudeau (a.k.a., Prime Minister Zoolander), increased the top tax rate from 29 percent to 33 percent after taking office in late 2015.

It appears, though, that he wasn’t aware of a concept known as the Laffer Curve (or, like some folks on the left, maybe he simply didn’t care).