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Average Canadian family pays more in taxes than it does for food, clothing, and shelter combined

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Release Date: April 26, 2011

VANCOUVER, BC—The average Canadian family spent more than 41 per cent of its annual income on taxes in 2010, more than it paid for food, clothing, and shelter combined, concludes a new study released today by the Fraser Institute, Canada’s leading public policy think-tank.

“Taxes have grown over the past 49 years to the point that government is now the largest expenditure facing a family,” said Niels Veldhuis, Fraser Institute senior economist and co-author of the Canadian Consumer Tax Index 2011.

Much like the Consumer Price Index calculated by Statistics Canada which tracks the average price that consumers pay for the goods and services they choose to purchase, the Canadian Consumer Tax Index tracks the price of goods and services that government buys on behalf of Canadians.  

In 2010, a Canadian family with an average income of $72,393 spent 41.3 per cent of its income on taxes, while spending 34.0 per cent on the necessities of life: food, clothing, and shelter.

But it wasn’t always this way. In 1961, the average family spent 33.5 per cent of its income on taxes, while 56.5 per cent was required for food, clothing, and shelter.

The report calculates that since 1961, the average Canadian family’s total tax bill has increased by 1,686 per cent. In contrast, expenditures on shelter increased by 1,175 per cent, food by 498 per cent, and clothing by 510 per cent from 1961 to 2010. Additionally, the increase in taxes has far outpaced the increase in the Consumer Price Index, which was 642 per cent between 1961 and 2010.

“The average Canadian family has seen its total tax bill increase by an astounding 1,686 per cent over the past 49 years. As a result, taxes have become the most significant item in family budgets,” Veldhuis said.

The Canadian Consumer Tax Index calculates the total tax bill paid by a Canadian family with average income by adding up the various taxes that the family pays to federal, provincial, and local governments. These include taxes such as income taxes, sales taxes, Employment Insurance and Canada Pension Plan contributions, as well as “hidden” taxes such as import duties, excise taxes on tobacco and alcohol, amusement taxes, and gas taxes.

“At this time of year, most Canadians are focused on filing their income tax returns. But personal income taxes account for just about one-third of the total tax bill paid by the average Canadian family in 2010,” Veldhuis said.

This year’s index shows that even though average family income increased significantly since 1961 (1,348 per cent), the total tax bill increased at a much higher rate (1,686 per cent).

  • In 2010, the average Canadian family earned an income of $72,393 and paid total taxes equaling $29,913—41.3 per cent of its income.
  • In 1961, the average Canadian family earned an income of $5,000 and paid $1,675 in total taxes—33.5 per cent of its income.

Impact of government deficits

The report also examines the impact of government deficits on the total tax bill of the average Canadian family. With the federal and most provincial governments increasing spending and incurring significant deficits, Charles Lammam, Fraser Institute senior policy analyst, suggests that deficits should be thought of as unpaid debts that must eventually be paid through taxes.

“If we include government deficits, we see the total tax bill for the average Canadian family is actually $33,275 in 2010, not $29,913. This means the average Canadian family faces a future tax bill of an additional $3,362,” he said.

When current government deficits—deferred taxation—are included in the tax calculation, the total tax burden for an average Canadian family has increased by 1,887 per cent since 1961.

“Unless governments get spending under control and find a way to reduce their deficits, Canadian families face the spectre of increased taxation,” Lammam said.



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