If you asked average Canadian families what their largest expense is, many would probably say housing. And you can’t blame them. Mortgage and rental payments are a painful monthly reminder of how much we pay for this basic necessity.
But what if we told you that the average family’s largest expense is, in fact, taxes? When we say taxes, we don’t just mean income taxes. We’re talking about all the taxes you pay to all levels of governments (federal provincial, and local). This includes a combination of both visible and hidden taxes-everything from income taxes, which are less than a third of the total, to payroll taxes, health taxes, sales taxes, property taxes, profit taxes, profit taxes, fuel taxes, vehicle taxes, import taxes, alcohol taxes and tobacco taxes, and much more.
For 2013, we estimate that the average Canadian family earned $77,381 in income and paid $32,369 in total taxes or 41.8 percent of income (the average family here includes single people). In the same year, just 36.1 percent of the average family’s income went to food, clothing, and shelter combined. Indeed, Canadian families spend more on taxes than on the basic necessities of life.
With more money going to the government, the reality is that families have less to spend on things of their own choosing whether it’s a new car, technological gadget, or family vacation.
But it wasn’t always this way.
Back in 1961 (the first for which we have calculations), the average family earned approximately $5,000 and paid a much smaller portion of its household income in taxes (33.5 percent) while spending proportionately more the basic necessities (56.6 percent).
In Taxes versus the Necessities of Life: the Canadian Consumer tax Index. 2014 edition, published by the Fraser Institute, we track the total tax bill of the average Canadian family from 1961 to 2013. Since 1961, we find that the total tax bill increased by 1,832 percent, dwarfing increases in shelter costs (546 percent). Even after accounting for inflation, which is the change in overall process, the tax bill shot up 147 percent over the period.
Over the past five decades, the total tax bill grew faster that the cost of basic necessities and now taxes eat up more income than any other single family expense.
With more money going to the government, the reality is that families have less to spend on things on their own choosing, whether its new car, technological gadget, or family vacation. They also have less money available to save for retirement or their children’s education, or to use to pay down household debt.
While there’s no doubt that taxes help fund important government services, the real issue is the amount o taxes that governments take compared to what we get in return. With almost 42 percent of income going to taxes, Canadians should ask whether they get the best value for their tax dollars.
Are we paying too much, too little, or just the right amount? That’s up to you and your family to decide.
But to make an informed assessment, you must have a complete understanding of all of the taxes you pay. Unfortunately, its not so straightforward because the different levels of government levy such a wide range of taxes, many of which are buried in consumer prices and hard to discern. Therein lies the value of our calculations.
Armed with this knowledge, we can hold our governments more accountable for the resources they extract and continue a public debate about the overall tax burden, the amount and scope of government spending, and whether we’re getting our money’s worth.