Canada’s Parliamentary Budget Office estimates that Motion M-24’s proposed higher federal tax rates on high-income earners would generate CAD 4.5 billion in net revenue over five years after accounting for taxpayer behavioural responses.

RF Report

Canada’s Parliamentary Budget Office (PBO) released its fiscal analysis of Motion M-24 on 24 September 2026, estimating the proposed personal income tax bracket changes will generate CAD 4.5 billion in net federal revenues over five years after accounting for taxpayer behaviour shifts.

Motion M-24, introduced by Member of Parliament Don Davies, calls for three new personal income tax brackets set to take effect on 1 January 2027. The proposal targets high-income earners with the following structure:

  • Taxable income between CAD 500,000 and CAD 750,000 (inclusive): 34% federal tax rate
  • Taxable income between CAD 750,000 and CAD 1,000,000 (inclusive): 35% federal tax rate
  • Taxable income above CAD 1,000,000: 36% federal tax rate

Motion M-24 proposed changes to federal personal income tax brackets and rates, 2027

Taxable income (CAD) Existing rate (%) M-24 proposed rate (%)
Up to 59,541 14 14
59,541 to 119,081 20.5 20.5
119,081 to 184,597 26 26
184,597 to 262,979 29 29
262,979 to 500,000 33 33
500,000 to 750,000 33 34
750,000 to 1,000,000 33 35
Above 1,000,000 33 36

Revenue losses from taxpayer responses

The PBO calculated that Motion M-24 would generate CAD 8.7 billion in gross revenues on a mechanical basis before any changes to taxpayer behaviour. However, the office factored in an elasticity of taxable income (ETI) of 0.38 for affected individuals, which accounts for the likelihood that high-income taxpayers will respond to higher rates through tax planning and reduced work effort.

The PBO estimates this behavioural adjustment will reduce gross revenues by approximately CAD 4.2 billion between 2026-27 and 2030-31. This represents an offset of roughly 48% of the mechanical revenue gain. High-income taxpayers already face combined federal and provincial marginal tax rates at the upper limit, and they possess sophisticated strategies to manage income timing, defer capital gains, and optimise their tax position.

Alternative minimum tax considerations

The analysis revealed that Motion M-24 would interact with the federal Alternative Minimum Tax in unexpected ways. Higher regular income tax liabilities would push some taxpayers out of the AMT system. The PBO estimates this shift will increase net federal revenues by CAD 596 million in 2027, as more high-income filers pay regular income tax rather than AMT.

However, the report cautions that the estimate excludes potential broader international effects, such as relocation of wealthy individuals or changes in immigration patterns.

The revenue figures presented by the PBO represent only federal impacts and do not account for any provincial or territorial revenue changes that may result from taxpayer adjustments to their income.