The Canadian Income Taxation: Statistical Analysis and Parametric Estimates

Using the administrative tax return database from Canada, we report facts on the distribution of tax liabilities and the variation of average tax rates by family size and marital status and compare them with those of the US. We estimate parametric tax functions used in applied macroeconomic and public finance studies. Although these functions are good fits to the data, their residuals are significantly high at top income levels. We introduce a new parametric tax function which captures the top rates better compared to existing tax functions. The new specification can provide better quantitative analysis for studies on heterogeneous households.