Province now hits top earners with a 53.5% tax rate, one of the highest in North America
British Columbia now hits top earners with a 53.5 percent marginal tax rate and businesses with the highest tax on new investment in Canada—at the same time US competitors keep cutting their own burdens.
A new 2026 bulletin from the Fraser Institute says British Columbia faces “significant tax competitiveness challenges” for both businesses and individuals.
Competitive tax systems, the authors note, support economic growth by helping jurisdictions attract business investment and skilled workers.
Personal income tax: from advantage to liability
The bulletin finds that British Columbia’s top combined federal/provincial personal income tax (PIT) rate has risen sharply over the past decade.
In 2015, the top rate stood at 45.8 percent.
After the federal government created a new top bracket in 2016, lifting the federal rate from 29 percent to 33 percent, and the province later raised its own top marginal rate from 16.8 percent to 20.5 percent, the combined top rate climbed by 7.7 percentage points to 53.5 percent.
Among the 10 provinces, 50 US states and Washington, DC, British Columbia now has the 4th‑highest top combined PIT rate. Newfoundland and Labrador sits highest at 54.8 percent.
The bulletin pegs the US average top combined federal/state marginal PIT rate at 42.0 percent, which is 11.5 percentage points lower than British Columbia’s rate.
Regionally, British Columbia’s top rate exceeds all nearby American states.
California’s top PIT rate is 3.2 percentage points lower.
Neighbouring Alaska and Washington have no state‑level PIT, so their top marginal PIT rates—based solely on the US federal rate—are 16.5 percentage points below British Columbia’s.
Thresholds matter as well.
British Columbia’s top rate starts at $259,829. In California, the top rate applies at US$1,000,000.
In Alaska and Washington, the top US federal rate applies at US$626,350 for individual filers.
The bulletin stresses that British Columbia not only levies a higher top rate than these peers, but also applies it at a much lower income level.
The analysis notes that, without the recent federal and provincial hikes, British Columbia’s top rate would be lower than California’s and Oregon’s, and the gap with no‑PIT states in the region would be about half of today’s 16.5‑percentage‑point spread.
The bulletin also highlights how far the province has moved since 2013, when its top tax rate was 14.7 percent.
It says British Columbia has seen the second‑largest increase in the combined top PIT rate since 2015, behind only Alberta, and the largest increase since 2013.
Beyond the very top bracket, the province also looks uncompetitive.
Out of 61 Canadian and US jurisdictions, British Columbia ranks 8th‑highest for the marginal rate at $150,000 of income and 10th‑highest at $50,000.
Citing recent research, the bulletin links higher top PIT rates to reductions in “business entry” in Canada and points to evidence that the 2016 federal PIT increase produced only a minimal net revenue gain once taxpayers adjusted and the tax base shrank.
Business investment: highest METR in Canada
On the business side, the Fraser Institute focuses on the marginal effective tax rate (METR) on new investment—a measure that bundles corporate income taxes, sales taxes on capital and other capital‑related taxes into a single estimate of the share of investment returns lost to taxation.
According to the bulletin, British Columbia’s METR in 2020 was 25.6 percent, the highest in Canada and 4.6 percentage points above Manitoba, the next‑highest province.
Quebec, Ontario and Alberta ranged from 11.5 percent to 15.1 percent.
The authors attribute British Columbia’s high METR primarily to its provincial sales tax (PST), a retail sales tax that applies to capital purchases such as equipment and construction materials.
In contrast, value‑added systems like the federal goods and services tax and harmonized sales taxes elsewhere allow businesses to deduct tax on capital inputs.
The province briefly adopted a harmonized value‑added tax in 2009/10 but reverted to the PST after a referendum.
The bulletin cites estimates that the overall tax rate on new investment jumped from 16 percent to 27 percent following this reversal, giving British Columbia the highest rate in the country.
It describes the PST as “by far the most significant tax disincentive impeding investment in British Columbia” and notes that eliminating the PST on all forms of investment would reduce the province’s METR to 16.2 percent.
The Employer Health Tax (EHT) adds to costs by raising the price of adding workers and, because some of the burden passes to employees through lower take‑home pay, it also interacts with the PIT competitiveness issue.
Losing ground to US reforms
The bulletin says British Columbia’s position has also weakened relative to the United States.
Before the Tax Cuts and Jobs Act, British Columbia’s METR was higher than the Canadian average but 6.9 percentage points lower than the US average.
After the US cut its federal corporate income tax rate by 14 percentage points and accelerated capital deductions, that relationship flipped: by 2020, British Columbia faced a 3.0‑percentage‑point METR disadvantage versus the US average.
More recent US legislation, commonly labelled the “One Big Beautiful Bill,” will further reduce METRs in several sectors.
Canada’s 2025 federal budget introduced accelerated depreciation to lower METRs on new investment, but the bulletin notes that many of these measures are temporary, which can create policy uncertainty and make them less effective at attracting investment.
The study concludes that relatively high PIT rates paired with high METRs on business investment now create a broad tax competitiveness challenge for British Columbia—one it says should concern provincial policymakers.
