Lower income households are feeling the burden, while the wealthiest remain resilient
Some Canadian households are struggling with their finances more than ever according to a new report.
Two in five respondents to an Angus Reid Institute survey published today, say they are worse off now than a year ago, the largest group saying this in 13 years the organisation has been tracking.
And with the cost of living rising, the share of people who say it is currently difficult to feed their family has risen from around one third (36%) in 2021 to more than half (57%) in 2022.
Most of those in financial peril earn low incomes, have stagnant wages, and more precarious housing situations.
Conversely, those with higher incomes and low debt levels report that their financial situation is unchanged or has improved over the past year.
Looking ahead, while 24% of respondents are optimistic that their finances will improve over the next 12 months, 29% feel they will worsen.
Debt remains a major source of stress for one-quarter (24%) of Canadians and a minor concern for two-in-five (42%), while the prospect of higher interest rates – perhaps from next week – is a worry.
Those aged 35-54 are most likely to say they are struggling financially with more than one third of men and women in this position compared with a quarter of over 55s and around one fifth of under 35s.
Middle class taxes
While Canada’s lowest-income households are more likely to be struggling, those on middle-incomes are feeling the burden on higher taxes.
A separate report this week from the Fraser Institute says that the vast majority of middle-class Canadian families pay higher federal personal income taxes due to tax changes made by the federal government.
Looking at data from 2015 onwards, the study found that, while the second-lowest personal income tax rate was cut in 2015 from 22% to 20.5%, income-splitting for couples with young children was scrapped along with a series of tax credits, which more than offset the savings from the tax rate reduction.
As a result, the study finds that 86% of middle-class families experienced an increase in their federal personal income tax burden of an average $800 annually.
“By promoting one income tax change and downplaying others, Ottawa paints an incomplete picture of the overall impact of their tax changes, which have imposed a higher personal income tax bill on the vast majority of middle-class families,” said Jake Fuss, senior economist at the Fraser Institute and co-author of ‘Measuring the Impact of Federal Personal Income Tax Changes on Middle Income Canadian Families since 2015.’
