Newfoundland and Labrador celebrated Tax Freedom Day later than every other Atlantic province
Newfoundlanders and Labradorians face a significant tax burden each year. In addition to paying income taxes, they also pay sales taxes, carbon taxes, property taxes, and many other types of taxes. This can make it difficult to know how much families pay in total taxes annually. Thankfully a concept known as Tax Freedom Day shines a light on just how much is paid.
Tax Freedom Day is the day in the year the average family in Newfoundland and Labrador has earned enough money to pay all taxes imposed by the federal, provincial and local governments. In other words, if residents paid all their taxes up front beginning Jan. 1, they would have to pay every dollar earned until Tax Freedom Day.
This year, people in Newfoundland and Labrador celebrated Tax Freedom Day on June 26, later than every other Atlantic province and 12 days later than the last pre-COVID Tax Freedom Day in 2019 (June 14). In other words, Newfoundlanders and Labradorians before the pandemic were free from taxes almost two weeks sooner than today.
According to research published by the Fraser Institute, the average family in the province (of two or more people) earning $117,564 will pay an estimated $56,588 in total taxes—or 48.1 per cent of their income in 2023. If this family paid all taxes upfront, they would pay the government every dollar earned until June 26. In other words, after working the first 175 days of the year for government, only then can the average family in Newfoundland and Labrador start working for themselves.
It's also worth noting that Newfoundland and Labrador has some of the highest marginal income tax rates in North America across a variety of income levels. For example, at $50,000 of income, the province’s combined (provincial and federal) tax rate is 35 per cent, fourth-highest among all provinces and U.S. states. This relatively high tax burden, as well as limited income growth, is part of the reason why the province’s Tax Freedom Day falls 12 days later than Alberta, for example.
Additionally, because of past spending programs, residents of the province have the biggest personal burden in the country when it comes to interest payments on the provincial debt ($2,047 per person). This accounts for almost 11 percent of the province’s total revenue.
Government spending today will likely result in higher taxes in the future. To help appreciate the size of the debt burden being passed on, the study also calculates a “balanced budget” Tax Freedom Day for Newfoundland and Labrador. If federal and provincial governments had to raise taxes today to balance their budgets—instead of financing their spending by borrowing—the province’s Tax Freedom Day would fall nine days later on July 5.
Simply put, residents of Newfoundland and Labrador face a significant tax burden on a yearly basis. Until governments restrain spending and lower taxes, residents of the province will continue working nearly half the year for the government before keeping some of their own money. Changing this dynamic should be a priority for the Furey government.