The percentage of seniors facing very high effective tax rates on pension income has climbed from 20 per cent in 2010 to more than 40 per cent today, C.D. Howe Institute says. Photo by Getty Images

Seniors and low-income families trying to save or work more are being hit with a “hidden tax” that’s stripping as much as 75 per cent off every dollar gained, says a new report.

Clawbacks of government benefits for low-to-middle income Canadians can create high effective tax rates that discourage them from taking on a job or saving more for retirement, said researchers with the C.D. Howe Institute.

As personal incomes rise above the threshold of income-tested benefits whether from taking on more work or drawing more savings, not only are benefits clawed back, but income taxes also rise.

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