Ever hear someone complain that if they work more or get a raise they will reach the next tax bracket and make less money than they do now? In Canada this is never true.
In Canada we use a progressive tax system where the more money you earn the higher the percentage of taxes you will pay. Tax Brackets are the income levels where rates increase as you earn more. These brackets can change each year and are different for each province, however, what is often misunderstood is that the percentage only increases for the income earned within each tax bracket.
Example: Susie just received a raise that pushes her into the second tax bracket. Susie will still pay income tax at the same lower rate for every dollar earned in the first tax bracket and she will only pay income tax at the higher rate for the dollars earned in the second tax bracket. Therefore, Susie will never be worse off for receiving a raise or working more hours.
In some situations when a large amount of overtime is paid, a bonus is received, or significant additional income is earned in one pay period, payroll deductions can make it appear that less is earned since a greater percentage has been deducted from pay. This however, will create a tax credit that is typically refunded when filing your personal income tax at the end of the year; since income tax is determined based on total yearly income and not based on what was deducted from each pay period.
You will never be worse off by earning more income with a progressive tax system.
