If you think June 9 is too late for Tax Freedom Day, just wait
The official start of summer is just a few weeks away and we’re fast approaching the half-way point of the year. So consider this—if you had to pay all your taxes for the year up front, you would have worked for the government (federal, provincial and local) every minute from New Year’s Day until this morning.
That’s why we call it Tax Freedom Day, because today—June 9—is the day you finally start working for yourself.
And if you think working 159 days of the year to pay taxes is too long, hang on. In the future, you may have to wait even longer for Tax Freedom Day because higher taxes are on their way up.
It’s actually easy to lose sight of all the taxes we pay throughout the year, which include everything from income taxes, payroll taxes, sales taxes, property taxes, fuel taxes, carbon taxes, profit taxes, import taxes, to various “sin” taxes and much more. Some of these taxes are visible but many are hidden, making it difficult for the average Canadian to get a clear sense of their total tax bill.
That’s why the Fraser Institute calculates Tax Freedom Day every year—it’s an easy way to help Canadians understand how much they pay in taxes.
And it’s not an insignificant amount. In 2017, the average Canadian family with two or more people will pay $47,135 in total taxes—that’s 43 per cent of their $108,674 annual income.
But believe it or not, 43 per cent isn’t even enough to pay the full freight of government. Remember, the federal and many provincial governments are running deficits, meaning they’re spending more than they’re collecting in revenues. A deficit today is nothing more than a deferred tax that must be paid by taxpayers in the future. Collectively, our governments are spending $41 billion more than the taxes we currently pay.
Which leads to another calculation. If governments in Canada, in an effort to balance their budgets, increased taxes to match their spending, Tax Freedom Day would actually arrive nine days later. That means you would start working for yourself on June 18—after working for the government for the first 168 days of the year.
Many governments have also announced significant tax increases so the spectre of a higher tax burden in the future is real.
For instance, take the Trudeau government’s plan to impose carbon pricing on all provinces starting next year at the equivalent rate of $10 per tonne, with the rate reaching $50 per tonne by 2022. This tax will directly raise the cost of many goods we consume including fuel for our cars and natural gas to heat our homes. We’ll all pay indirectly as higher production and transportation costs drive up consumer prices.
And then there’s the higher payroll taxes working Canadians will pay for the expansion of the Canada Pension Plan, which starts in 2019. Once fully implemented in 2025, Canadian workers will pay a two per cent higher tax on eligible earnings up to the current limit, and an additional eight per cent above the current limit (up to a maximum amount of earnings).
All this doesn’t even account for the potential for higher taxes at the provincial and municipal levels, too, which would drive the tax burden higher still.
June 9 may seem late for Tax Freedom Day, but without a change in direction, all signs point to an even later day in the future.
So Happy Tax Freedom Day Canada, although “happy” may not be the right word.