Tax burden for P.E.I. families continues to grow
Prince Edward Islanders pay a significant amount of taxes to governments each year—income taxes, sales taxes, property taxes, carbon taxes, and many other taxes. With so many different forms of taxation, it can be hard to figure out exactly just how much Islanders pay over the course of a year. Fortunately, a concept known as Tax Freedom Day sheds light on this important question.
Tax Freedom Day is the day in the year when the average family in P.E.I. has earned enough money to pay all taxes imposed by the federal, provincial and local governments. In other words, if Islanders paid all their taxes up front beginning Jan. 1, they would have to pay every dollar they earned to governments until Tax Freedom Day.
This year Tax Freedom Day in P.E.I. fell on June 9—three days later than last year and the third year in a row with a later Tax Freedom Day than the prior year. June 9 also marks one of the latest Tax Freedom days in the province’s recent history, as it’s 12 days later than the 2019 Tax Freedom Day (May 28). Simply put, the tax burden is growing for Island families.
According to a new study published by the Fraser Institute, the average family in P.E.I. (two or more people) will earn an estimated $116,332 and pay $50,444 in total taxes—or 43.4 per cent of its income in 2023. If this family paid all taxes for 2023 upfront, it would pay the government every dollar earned until June 9. After working the first 159 days of the year for the government, only then can the average family in P.E.I. start working for themselves.
Moreover, the tax bill for the average family in P.E.I. increased by 3.7 per cent (nearly $1,800) this year while its income only grew by 1.7 per cent.
Polling data shows that 75 per cent of Atlantic Canadians believe the average family should pay 40 per cent or less of their total income on taxes. The same poll also shows that only 9 per cent of Atlantic Canadians feel they get good or great value from government services relative to what they pay in taxes. In light of the current tax rate of 43.4 per cent for families in P.E.I., the polling suggests Islanders are taxed more than they feel is fair, in addition to concerns over quality of services they expect from their governments.
Finally, the P.E.I. government projects a budget deficit this year. Deficits today will result in higher taxes in the future. To help put into perspective the size of the debt burden being passed on, the study also calculates a “balanced budget” Tax Freedom Day for P.E.I.—that is, if the federal government and the provincial government had to raise taxes today to balance their budgets—instead of financing their spending by borrowing—Tax Freedom Day in P.E.I. would fall nine days later on June 18.
With P.E.I. being one of only two provinces with a later Tax Freedom Day than last year, and the province’s date occurring 12 days later than in 2019, the burden of taxation is clearly mounting for Islanders. Governments in Charlottetown and Ottawa must better control spending or else the tax burden for families in P.E.I. will continue to grow in the coming years.