Canadians must know how much total tax they pay to assess whether they get good value
The Fraser Institute’s annual calculations of the average family’s tax bill provide a valuable service to Canadians. Taxes are a complex issue and it’s very difficult for Canadians to calculate how much total tax they pay throughout the year. Some taxes are visible and easy to understand—like income taxes—but so many others are hidden or difficult to track.
Our annual calculations give an accurate assessment of the total tax bill for the average family and this year we find calculate the average Canadian family will pay 42.5 per cent of its income on taxes, more than the 37.4 per cent it spends on housing, food, and clothing combined. Armed with this knowledge, Canadians can determine if they are getting good value in return.
Rather than recognize this contribution, the Toronto Star’s editorial board recently made several false statements about our study.
In examining how the total tax bill of the average family has changed since 1961, we find that taxes grew 2,006 per cent. The reason we present this nominal growth rate is to compare the growth in taxes to the growth in the average family’s spending on housing (1,527 per cent), clothing (677 per cent), and food (639 per cent), as well as growth in the larger basket of goods and services families buy (i.e. inflation). Indeed, over the same period the average consumer price index, a measure of inflation, increased 718 per cent, just a fraction of the growth in taxes.
Obviously the Star missed the point of these comparisons when it accused us of not accounting for inflation. Perhaps more troubling is the fact that our study clearly presents inflation-adjusted calculations of the total tax bill over time. After adjusting for price changes (inflation) over the 55-year-period, the average Canadian family has seen their taxes increase 157.6 per cent.
The Star then goes on to suggest that our study uses “questionable methodology” to inflate the taxes we pay and stoke “anti-tax panic.” Nothing could be further from the truth.
We need taxes to fund important government services, critical both to a well-functioning economy and more generally, civilization. But the goal of the study is to measure all the taxes that Canadian families pay—not just the visible ones we see deducted on our pay stubs or income tax returns.
In particular, the Star takes issue with our inclusion of business taxes, claiming they are “largely shouldered by richer Canadians.” While it’s true that upper-income Canadians bear a disproportionate share of business taxes, the reality is that average Canadian families are still burdened by them.
Consider a small business owner. It’s absurd to assume a hard-working entrepreneur doesn’t pay the taxes imposed on his or her business. Likewise for larger companies. In fact, public-sector pension plans (those for teachers, as an example) and the Canada Pension Plan are the largest business owners in the country. The Star apparently doesn’t believe that the shareholders and workers of those companies—which are absolutely average Canadians—pay, in part, the taxes imposed on those businesses they own through their investments.
Average Canadians also pay business taxes when those taxes are passed on to consumers in the form of higher prices, and as ordinary workers in the form of lower wages. That’s supported by the evidence and it’s why business taxes are absolutely part of the taxes that average Canadians pay.
But this excerpt from the Star is especially ironic: “The study’s greatest failing, however—the omission that ultimately renders its statistics meaningless—is that it makes no mention whatsoever of what we get in return for our tax money.”
Actually, that’s precisely why our statistics are so meaningful.
As noted, it’s very difficult for an average Canadian to figure out all the taxes they pay each year. That’s where our annual calculations help. By giving an accurate and comprehensive cost of government for the average family, this allows Canadians to then assess whether they’re happy with the government services they receive.
After all, you can’t have an informed debated about value for your tax dollars unless you know how much—in total—you pay.
Ultimately, it’s up to individual Canadians and their families—not the Toronto Star or the Fraser Institute—to decide whether they get good value for their tax dollars.