Taxes remain largest expense for Canadian families—with no relief in sight

Across the country, families are struggling with the rising cost of living. Housing shortages in major cities are driving up rent and home prices while disruptions to the global supply chain push food prices higher than they’ve been in 40 years. And federal climate policy (namely the carbon tax) continues to increase energy and fuel costs.

In response, the Trudeau government has made it a top policy goal to address affordability. However, with all the talk about “grocery rebates” or $10-a-day daycare, the government appears to ignore the largest single expenditure Canadian families face—taxes.

A new study published by the Fraser Institute calculates your total tax bill—that is, all taxes Canadian families pay to federal, provincial and local governments. These include income taxes, sales taxes, property taxes and more.

According to the study, in 2022 the average Canadian family (household income of $106,430) paid $48,199 in total taxes (or 45.3 per cent of its income). For context, that same family spent $37,827 (or 35.6 per cent of its income) on food, shelter and clothing. In other words, Canadian families paid more in taxes than they spent on the basic necessities.

Taxes are clearly the largest item in family budgets, and tax relief would put hard-earned money back into the pockets of Canadians and help families pay for the increased cost of living. Unfortunately, federal tax relief is unlikely anytime soon. In fact, the tax burden will likely grow heavier moving forward.

Why?

Because the Trudeau government has increased spending significantly in recent years. According to projections, from fiscal year 2019/20 to 2023/24, annual program spending will increase by more than $100 billion (adjusted for inflation and population growth, this translates to an additional $793 per person). To finance most of this spending, the government has borrowed money. Consequently, over the same four-year period, the federal government will add more than $520 billion in nominal net debt (total debt minus financial assets), and forecasts show a string of budget deficits for the coming years, which means more debt accumulation.

As a result, the federal government has left limited fiscal room for tax reductions. And because debt accumulated today must be repaid in the future, that burden will likely fall on future taxpayers in the form of higher taxes.

At a time when many Canadians are struggling to put food on the table, taxes remain the single largest expenditure families face. Unfortunately, due to the Trudeau government’s massive spending increases, deficits and debt accumulation, tax increases—not tax reductions—are more likely in the coming years.