A new comprehensive report on Canadian taxes from the Fraser Institute reveals a disturbing truth about how much government spending has grown and the burden this has put on the taxpayers that have to flip the bill.
It turns out that in 2019 the average Canadian family pays significantly more in taxes than on basic necessities, according to the data collected and disseminated by researchers Milagros Palacios and Jake Fuss.
As the Fraser Institute summarizes, “The Canadian Consumer Tax Index tracks the total tax bill of the average Canadian family from 1961 to 2018. Including all types of taxes, that bill has increased by 2,246% since 1961.
“Taxes have grown much more rapidly than any other single expenditure for the average Canadian family: expenditures on shelter increased by 1,593%, clothing by 769%, and food by 639% from 1961 to 2018.”
“The 2,246% increase in the tax bill has also greatly outpaced the increase in the Consumer Price Index (750%),” they continue, “which measures the average price that consumers pay for food, shelter, clothing, transportation, health and personal care, education, and other items.”
In total, the average Canadian family spends 44.2% of its income exclusively on taxes, while their basic necessities — food, shelter, clothing, amenities, etc. — cost 36.3%.
“In 2018,” the Fraser Institute explains, “the average Canadian family earned an income of $88,865 and paid total taxes equaling $39,299 (44.2%).”
Where does the bulk of these taxes come from? Income tax.
According to the report, 31.2% of the tax bill of the average Canadian family in 2018 was paid in the form of income tax. Out of the above figure of $39,299, that comes out to a whopping $12,242.
Income tax alone in 2018 is almost equal to the total average income of Canadian families in 1974 which was approximately $12,500. Even adjusted for inflation, it’s doubtful many families could get by in 1961.
For some perspective, here is what you can buy with $12,242 extra at the end of the year every year:
Or you could always save it for your kid’s University fund and save them the 10+ years of debt payments. The choice would be yours.
The other major taxes are Payroll & health taxes (19.0%), Sales taxes (14.9%), Property taxes (10.8%), Profit tax (12.0%), Liquor, tobacco, amusement, & other excise taxes (4.7%), Fuel, motor vehicle licence, & carbon taxes (2.8%), Other taxes (2.7%), Natural resource taxes (0.9%), and Import duties.
Why have taxes increased by such an astronomic rate, but expenses such as shelter and taxes on consumable goods have not?
In short, running deficits and budgets which cannot be properly balanced.
As the Fraser Institute’s Milagros Palacios and Jake Fuss explain:
In fiscal year 2018/19, the federal and five provincial governments ran operating deficits. Of course, these deficits must one day be paid for by taxes… The total tax bill of the average family would be higher than it actually is if, instead of financing its expenditures with deficits, all Canadian governments had simply increased tax rates to balance their budgets. Indeed, the Canadian Consumer Tax Index would have increased to 2,449 if deferred taxation was added to the average family’s total tax bill. Once deferred taxes are included, the tax bill of the average Canadian family has increased by 2,349% since 1961.
The report goes on to detail how family spending has changed. In 1961, families spent 56.5% of their income on basic necessities and only 33.5% in taxes. By 1981 it was equal. Now, it is almost completely reversed, with more and more of Canadian citizens’ wealth being drained into government spending and less being left over for the people who create the wealth in the first place.
“Our economy has grown in size over the past few decades, real wages have grown. Government has grown with it in lock step,” Finn Poschmann, a resident scholar at the Fraser Institute, told CTV News in an interview. “And in some years it’s grown faster than the economy and some years slower, but overall we have a much bigger government than we did a couple generations ago.”
Between 2017-2018, the amount of revenue generated via taxes for government spending totalled $313.6 billion, with 49% of this massive figure coming from personal income tax.
The government used a total of $310.7 billion on program expenses such as elderly care, medical care, childcare, etc.
However, the Canadian government now runs with assumption of a deficit, meaning that billions more are being borrowed and being used on less essential programs, ensuring that tax rates rise proportionally as debt payments increase.
As the Annual Financial Report of the Government of Canada Fiscal Year 2017–2018 documents, “With total liabilities of $1.2 trillion, financial assets of $398.6 billion and non-financial assets of $87.5 billion, the federal debt stood at $671.3 billion at March 31, 2018, up $19.7 billion from March 31, 2017.”
And, of course, the debt is rising, and spending is not slowing down. Again, this means that Canadians can expect to be taxed at greater rates soon, despite the already huge strain being put on taxpayers.