Incomes of the top 1% of tax filers rose 9.4% to $579,100 in 2021. This occurred in the context of COVID-19 pandemic restrictions easing, many government benefit programs winding down, the labour market recovering, and the Canadian house prices and stock market indexes increasing in 2021.
Recovery produces uneven income gains in 2021
According to data based on the tax filings of individuals, the average total income of the top 1%, excluding capital gains, rose by 9.4% to $579,100 in 2021. Filers in the top 0.1% saw their average total income increase by 17.4% to $2,086,100, while those in the top 0.01% saw their average total income increase by 25.7% to $7,731,400. These increases offset the small declines observed in the top ranks of income earners in 2020.
In contrast, filers in the bottom half of the distribution saw their average total income decline by $1,400 from 2020 to $21,100 in 2021. This decrease was due in part to the lowering or ending of government transfers.
Accordingly, the share of total income earned by the top 1%, a commonly used measure of income inequality, rose from 2020 to 2021. In 2021, the top 1% of tax filers received 10.4% of aggregated income earned by tax filers, up from 9.4% in 2020 and the highest level posted since 2015.
In 2021, wages and salaries drove increased incomes for the top-income earners. People in the top 1% saw their average wage and salary income rise by 12.0%, while those in the top 0.1% saw an increase of 24.6% and those in the top 0.01% saw an increase of 34.5%.
Dividend income is also an important component of total income for the highest income groups. In 2021, these top groups saw large increases in dividend income, which returned this item to its pre-pandemic level. Filers in the top 1% received an average dividend income of $90,200 (+12.9% compared with 2020), those in the top 0.1% received $429,500 on average (+19.2% compared with 2020) and those in the top 0.01% received $2,009,700 on average (+26.0% compared with 2020).
Women continue to increase their representation at the top
Women’s representation in the top income groups continued to rise in 2021, continuing this long-standing trend. Overall, women composed 26.1% of the top 1% of income tax filers, up from 25.4% in 2020. The share of women in the top 1% has been increasing steadily since this series started in 1982 when the share was 11.4%.
Capital gains rise sharply in 2021
Income estimates, including those reported above, normally exclude capital gains, which are the net realizations from the sale of an asset or other property. However, for the study of top incomes, it is common to also examine income with capital ga