Tax burden goes up for Canadians
Taxes can take a big chunk out of your wallet – about 45 per cent of it, according to the Fraser Institute.
According to the think tank’s new study, the average Canadian family earned $63,000 in 2006 with 45 per cent of this income going to taxes. In comparison, just over 35 per cent was spent on such necessities as food, clothing and housing.
Taxes have gone up significantly in the past 45 years. The Canadian Consumer Tax Index, 2007, shows that even though the income of the average Canadian family has significantly since 1961, their total tax bill has increased at a much higher rate.
In 1961, the average Canadian family earned an income of $5,000 and paid $1,675 in total taxes – 33.5 per cent of its income.
In 2006, the average Canadian family earned an income of $63,001 and paid total taxes equaling $28,311 – 44.9 per cent of its income.
“The tax burden we face is made up of much more than just income tax. When you add up all the taxes we have to pay to all levels of government, the average Canadian family is paying more of its income to governments in the form of taxes than they spend feeding, clothing and housing themselves,” said Niels Veldhuis, the study’s co-author and Director of the Centre for Tax Studies with the Fraser Institute.
The Canadian Consumer Tax Index
The Canadian Consumer Tax Index calculates the total tax bill of the average Canadian family by adding up the various taxes paid to federal, provincial, and local governments. These include direct taxes such as income taxes, sales taxes, Employment Insurance and Canadian Pension Plan contributions, and “hidden” taxes such as import duties, excise taxes on tobacco and alcohol, amusement taxes, and gas taxes.
“Personal income taxes account for only 32 per cent of the total taxes the average Canadian family paid in 2006,” Veldhuis said.
An increasing tax burden
The Fraser Institute study looked at how the tax burden of the average family has changed since 1961:
• In 1961, the average family spent 56.5 per cent of their cash income to obtain food, clothing and housing. In the same year, 33.5 per cent of the family’s income went to governments as tax.
• By 1981, the situation had reversed – governments took 40.8 per cent of the income in the form of taxes, while the family used 40.5 per cent to buy food, clothing and housing.
• By 2006, the average family gave 44.9 per cent of its income to governments for taxes while using 35.6 per cent of its income to buy the necessities of life – food, clothing and housing.
Since 1961, the total tax bill for the average Canadian family has increased 1,590 per cent. By comparison, the cost of housing has increased 1,019 per cent, the cost of food 487 per cent and the cost of clothing has increased 447 per cent.
“Over the past 45 years, taxes have become the single largest expenditure in an average Canadian family’s budget with the total tax bill for a typical family increasing by 1,590 per cent since 1961,” Veldhuis said.
The Fraser Institute is an independent research and educational organization based in Canada. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute’s independence, it does not accept grants from governments or contracts for research.