Tax Freedom Day has finally arrived. This year, the average Canadian family worked until June 26th to pay their total tax bill. In other words, if we had to pay our taxes up front, every dollar earned from January 1 to June 26 would go to government. This of course translates into an awful lot of money. In fact, the average Canadian family will pay almost $37,000 in taxes to all levels of government.
While many Canadians happily pay their taxes to support the numerous government programs they believe are effective, a great many others are outraged at the level of taxation and the quality of government services they finance. With Tax Freedom Day having just past, all Canadians should ask themselves whether or not they are getting value for the nearly 50 percent of their income they send to governments.
The question of value for money is not easily answered and indeed some perspective is needed.
First, consider that the average Canadian family’s total tax bill as a percentage of income has increased dramatically over the past 40 years. Back in 1961, the average family had an income of $5,000 and paid a total tax bill of $1,675. In other words, 33.5 percent of family income went to taxes. In 2005, the average family’s tax bill will consume 48 percent of their income. In fact, the average Canadian family now spends more of its budget on taxes than it does on life’s basic necessities: food, shelter, and clothing combined.
Of course, as our taxes increased so too did the number and size of government programs. But are these programs being delivered in the most efficient manner and at the lowest cost to Canadians?
Take our health care system, for example; most Canadians are acutely aware of the problems with the government’s monopoly on health care. No nation spends more than Canada to deliver universal-access health care to their population. Despite that high level of spending, Canadians experience comparatively poor access to technology and doctors, long and increasing waiting times for surgery, and average health outcomes.
Similar patterns hold for education, social services, transportation, infrastructure, and a host of other government programs. In most cases, money is not the problem. In fact, Canada could reduce the amount spent on most of these programs and increase the benefits to Canadians through genuine reform.
In addition to the poor value for money we receive from many government programs, our tax dollars are often simply wasted; a fact highlighted by the recent sponsorship scandal and the fiasco surrounding the firearm registry. Unfortunately, these are not isolated events. Canada’s Auditor General consistently finds case after case of waste, misrepresentation, incompetence, and self-interested public officials. In fact, a recent survey of reports from the Auditor General from 1997 to 2004 found 120 cases where taxpayer’s dollars were either wasted or program objectives not achieved.
Finally, let’s not forget that every time the government does take a dollar from the pockets of taxpayers, it comes at a significant cost to our economy. Our personal income tax system penalizes hard work, risk taking, and entrepreneurship through highly progressive tax rates. In addition, we maintain relatively high tax on capital, which produces lower rates of investment, lower productivity, and lower wages for Canadian workers. High tax rates end up costing Canadians much more than their tax bills show.
Ultimately, individual Canadian taxpayers must determine if their taxes are too high and whether or not they are getting value for their tax dollars. To answer that question, Canadians need to have a clear idea of the price we pay for government services -- in other words, our total tax bill. Tax Freedom Day is a simple, graphic measure of an average family’s total tax bill; the cost of their bundle of government services. At the very least, Canadians will be better able to hold their politicians to account for taxes they extract.