Updated Checked by the Tax-Services.ca editorial team How we check
Regressive taxation means a tax takes a bigger share of a small income than of a large one. A sales tax is the classic case: two people pay the same 13% HST on a $20,000 purchase in Ontario, $2,600 each, but that’s 8.7% of a $30,000 income and 1.7% of a $150,000 income.
How can a flat rate still be regressive?
Because the rate isn’t the point. The share of income is. HST is the same on every dollar you spend, but people with less income spend most of what they earn, and people with more income save or invest a good part of theirs. Savings aren’t hit by sales tax, so the tax weighs more on the household that has to spend nearly everything.
The GST/HST calculator gives the tax on any purchase. Try $20,000 in Ontario and you’ll see the $2,600 above. The same purchase in Alberta, where only the 5% GST applies, carries $1,000. The CRA’s GST/HST and PST rates table lists the rate for every province.
Here’s a way to feel it. Nia earns $30,000 and spends nearly all of it, say $27,000 on taxable things. At 13% that’s $3,510 of HST, or 11.7% of her income. Colin earns $150,000 and buys $60,000 of taxable things. His HST is $7,800, only 5.2% of his income. He pays more than twice the dollars, and a much smaller share. These spending amounts are made up to show the idea, so don’t read them as averages.
Is income tax regressive too?
No, it goes the other way. Federal tax rates rise in steps from 14% to 33%, and Ontario adds its own steps, so the share you hand over climbs with your income. That’s what progressive means. We ran three Ontario earners through the marginal tax rate calculator.
| Employment income | Income tax | Share of income | Tax on next dollar |
|---|---|---|---|
| $30,000 | $2,452 | 8.2% | 17.6% |
| $60,000 | $8,320 | 13.9% | 28.1% |
| $150,000 | $39,911 | 26.6% | 43.4% |
The middle column is federal and Ontario income tax combined, not CPP or EI. The last column is what the tool reports for extra pay from work at that level.
Which taxes lean regressive?
The clearest example besides sales tax is a payroll premium with a ceiling. Employment Insurance is 1.63% of insurable earnings up to $68,900 in 2026, and the most you can pay is $1,123.07, according to the CRA’s EI premium rates and maximums page. So someone earning $30,000 pays $489, or 1.63% of pay, and someone earning $150,000 still pays $1,123.07, which is 0.75%. Above the ceiling, more income doesn’t mean more premium.
CPP works the same way above its own earnings limit, though it buys you a pension, which changes how people think about it.
What do the numbers look like side by side?
Here’s a rough view for the three earners, assuming each buys $20,000 of taxable goods in Ontario. Real spending differs, and that’s the point: the gap you see is the argument for or against how a tax is built.
| Income | HST on $20,000 of purchases | HST as share of income | EI premium as share of income |
|---|---|---|---|
| $30,000 | $2,600 | 8.7% | 1.63% |
| $60,000 | $2,600 | 4.3% | 1.63% |
| $150,000 | $2,600 | 1.7% | 0.75% |
How does Canada soften the regressive bits?
Two ways stand out. Basic groceries and prescription drugs carry 0% GST/HST. And there’s a payment for lower incomes, the Canada Groceries and Essentials Benefit, which replaced the GST/HST credit in July 2026. The most a single person can get is $679 a year, and our GST/HST credit calculator shows $679 at $30,000 of income and $501 at $50,000 as the benefit shrinks.
Does it fully cancel the burden? Not in these examples. $679 against $2,600 of HST leaves a gap, though real households rarely spend the same as the example.
How can you test a tax yourself?
Pick a tax, then ask two questions. How much of it would a lower-income household pay as a share of income, and how much would a higher-income one? If the first share is bigger, the tax leans regressive. If it’s smaller, it leans progressive. Run a few sample incomes through a calculator and you’ll see the pattern within minutes.
Mistakes when you talk about regressive taxes
Looking at one tax alone is the biggest. A tax can be regressive while the whole system is progressive, or the reverse, and only the total tells you. Another is comparing dollars. A rich person paying more in dollars can still be paying a smaller share.
And be careful with spending assumptions. Our $20,000 is the same for everyone so the maths is clean, but people at the low end often can’t spend that much, and people at the high end usually spend more. Use the idea, not the exact percentage.
Sources, and how we checked them
Federal rates, EI figures and the benefit amount come from the Canada Revenue Agency‘s 2026 pages and the payroll tables, and the sales tax rates from its GST/HST pages. Ontario tax figures are our calculator’s 2026 results. We haven’t judged whether any tax is fair. That’s a policy debate, and this page only shows what the numbers do.
Frequently asked questions
What is a regressive tax?
A tax that takes a bigger share of a low income than of a high one, even when the rate is the same for everyone.
Is HST regressive?
Usually yes, in share of income. On $20,000 of purchases HST is $2,600, which is 8.7% of a $30,000 income and 1.7% of a $150,000 income.
Is income tax regressive?
No. Canada's federal rates rise from 14% to 33%, so the share paid grows with income.
Is Employment Insurance regressive?
Above the ceiling, yes. The 2026 premium is 1.63% up to $68,900 of earnings, capped at $1,123.07.
How does Canada offset regressive taxes?
Groceries and prescription drugs are zero-rated, and a benefit pays up to $679 a year to a single person from July 2026.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill