Ontario Premier Doug Ford speaks during Question Period in the Ontario Legislature on Tuesday.Frank Gunn/The Canadian Press
Grady Munro and Jake Fuss are senior analysts at the Fraser Institute.
On Thursday, the Ford government released its 2026 budget, which introduces some initial measures from its highly-touted “Tax Action Plan” that’s meant to help make Ontario the “most competitive jurisdiction in Canada.”
Based on the rhetoric around this plan, it seemed the Ford government might finally follow through on its 2018 campaign promises to cut personal and business taxes. But unfortunately for Ontarians, the measures only tinker with the province’s tax system and fail to provide the tax relief necessary to achieve this worthy goal.
According to the budget, the Ford government will reduce the province’s small business tax rate from 3.2 per cent to 2.2 per cent, accelerate tax write-offs for certain eligible business investments, and temporarily rebate the provincial portion of the harmonized sales tax on all new homes valued up to $1-million. These measures will provide some measure of relief for Ontarian homebuyers and small businesses, but overall they fail to meaningfully increase Ontario’s tax competitiveness, which has been a longstanding drag on the economy.
Ontario projects $13.8-billion deficit in budget, delays balancing books
To increase competitiveness, jurisdictions design their tax systems to better attract and retain high-skilled workers (e.g. doctors, engineers), entrepreneurs, businesses and investment – all of which contribute greatly to economic growth and prosperity across the income spectrum. Generally, jurisdictions which impose lower taxes on individuals and businesses have a competitive advantage over jurisdictions that maintain higher taxes.
As of 2025, Ontario had some of the least competitive personal income taxes in North America. For instance, Ontario’s top combined (federal/provincial) income tax rate (53.53 per cent) ranked third-highest out of 61 Canadian and American jurisdictions – behind only Newfoundland and Labrador (54.8 per cent) and Nova Scotia (54 per cent).
In other words, Ontarians in the top income bracket faced a higher rate than top earners in places such as New York (47.90 per cent) and Michigan (41.25 per cent).
Ontario’s rates are similarly uncompetitive across a variety of incomes. For example, at $150,000 of income, Ontario’s combined rate (44.97 per cent) again ranked third-highest in North America, and at $75,000 and $50,000, Ontarians faced higher tax rates than Americans in every state (except Oregon and Hawaii).
Ontario budget 2026: Six takeaways from health care to HST
Despite this clear lack of competitiveness, in its new budget once again the Ford government failed to reduce income taxes for Ontarians.
And while the government reduced its small business tax rate, Ontario’s headline business tax rate (11.5 per cent) still remains well above Alberta’s (8 per cent, the most competitive in Canada). And research shows that businesses pass on the cost of business taxes to their employees (in the form of lower compensation), so reducing the headline business tax rate would have benefitted Ontario workers and helped spawn new businesses in the province.
In the wake of this budget, many will point to this year’s eye-popping $13.8-billion deficit and claim the government simply can’t afford to reduce taxes any further. But this ignores the fact the Ford government has maintained – and even increased – the sky-high levels of spending it inherited from the previous Wynne government. Given these elevated spending levels, the Ford government can and should reduce spending, not just to offset lower tax revenues in the short-term from meaningful tax cuts but ultimately to help balance the budget.
It’s been eight years since the Ford government first promised to introduce meaningful tax relief for Ontarians, and it seemed like the government’s highly-touted “Tax Action Plan” in this year’s budget might finally deliver on this promise. Unfortunately for Ontarians, the government has simply tinkered around the edges and failed to deliver the meaningful tax reform that Ontario needs.