The government collects nearly half of the average household’s income
A new study indicates that Canadian households are paying more in taxes than they do for basic living necessities.
The newly released Canadian Consumer Tax Index from the Frasier Institute has found that a family earning $83,105 annually pays $35,283 in taxes, reported the Toronto Sun. That amounts to 42.5%, compared to the 37.4% that researchers found goes to food, clothing, and housing.
The situation has reportedly worsened since 1961, when the average Canadian family earned $5,000 a year. At the time, the report said, the taxes a family paid would amount to $1,675 a year, or 33.5% of the household budget, and their basic necessities took a 56.4% share.
“If we just look at the average family in Canada — this is across the country — they are spending almost double the amount on taxes than they are on housing costs each year,” Charles Lammam, the director of fiscal studies at Frasier Institute, told the Sun.
The index, which Lammam said aimed to give Canadians a simple way to determine whether they were getting enough from government services, has been criticized before. In 2010, the Canadian Centre for Policy Alternatives questioned the institute’s use of “fuzzy math” that included business taxes in the calculation.
But Lammam argued that consumers, investors, and employees eventually end up paying business taxes, so they should count toward the amount paid by average Canadian households. He added that although there are more publicly funded services now compared to 1961, around 10% of the total tax paid by Canadians on average goes toward government debt servicing.
The index hasn’t increased consistently; there were some periods between 1961 and 2016 when the tax burden dipped. But the study found that since the last recession, the tax burden borne by average Canadians has increased as stimulatory government spending accelerated.
Lammam pointed out several other factors that will likely push taxes higher. These include new debt accumulated by some governments in Canada; a mandate from Prime Minister Justin Trudeau that all provinces enact some form of carbon pricing; the elimination of certain tax breaks; and planned increases in Canada Pension Plan payments to address concerns that many Canadians won’t have adequate pensions or savings later in life.
For more of Wealth Professional's latest industry news, click here.
Related stories:
Is the Canadian tax system really fair?
Why new tax changes will hit one group hardest
The newly released Canadian Consumer Tax Index from the Frasier Institute has found that a family earning $83,105 annually pays $35,283 in taxes, reported the Toronto Sun. That amounts to 42.5%, compared to the 37.4% that researchers found goes to food, clothing, and housing.
The situation has reportedly worsened since 1961, when the average Canadian family earned $5,000 a year. At the time, the report said, the taxes a family paid would amount to $1,675 a year, or 33.5% of the household budget, and their basic necessities took a 56.4% share.
“If we just look at the average family in Canada — this is across the country — they are spending almost double the amount on taxes than they are on housing costs each year,” Charles Lammam, the director of fiscal studies at Frasier Institute, told the Sun.
The index, which Lammam said aimed to give Canadians a simple way to determine whether they were getting enough from government services, has been criticized before. In 2010, the Canadian Centre for Policy Alternatives questioned the institute’s use of “fuzzy math” that included business taxes in the calculation.
But Lammam argued that consumers, investors, and employees eventually end up paying business taxes, so they should count toward the amount paid by average Canadian households. He added that although there are more publicly funded services now compared to 1961, around 10% of the total tax paid by Canadians on average goes toward government debt servicing.
The index hasn’t increased consistently; there were some periods between 1961 and 2016 when the tax burden dipped. But the study found that since the last recession, the tax burden borne by average Canadians has increased as stimulatory government spending accelerated.
Lammam pointed out several other factors that will likely push taxes higher. These include new debt accumulated by some governments in Canada; a mandate from Prime Minister Justin Trudeau that all provinces enact some form of carbon pricing; the elimination of certain tax breaks; and planned increases in Canada Pension Plan payments to address concerns that many Canadians won’t have adequate pensions or savings later in life.
For more of Wealth Professional's latest industry news, click here.
Related stories:
Is the Canadian tax system really fair?
Why new tax changes will hit one group hardest
