By Trevor Busch
The average Canadian family now spends more on taxes than on any other household expense, according to a new study released by the Fraser Institute.
In 2013, the study finds that the average Canadian family earned $77,381 and paid $32,369 in total taxes (or 41.8 per cent of income) compared to 36.1 per cent for food, shelter and clothing combined.
By comparison, in 1961 the average family earned approximately $5,000 and spent much more of its income on food, shelter and clothing (56.5 per cent) while $1,675 went to taxes (33.5 per cent).
“The direct and immediate impact (is) with more money going to the government, families have less to spend on things of their own choosing, whether it’s a new car, technological gadget, or family vacation,” said Charles Lammam, resident scholar in economic policy at the Fraser Institute and co-author of the Canadian Consumer Tax Index, which tracks the total tax bill of the average Canadian family over the past 50 years. “They also have less money available to save for retirement or their children’s education, or to use to pay down household debt.”
The total tax bill represents both visible and hidden taxes paid to the federal, provincial and local governments. This includes income taxes, payroll taxes, health taxes, sales taxes, property taxes, fuel taxes, vehicle taxes, import taxes, alcohol and tobacco taxes, and more.
“High and increasing taxes can also have a detrimental impact on economic growth and living standards,” said Lammam. “A large body of academic research finds that high and increasing marginal tax rates reduce people’s incentives to work, save, invest, and be entrepreneurial — all activities that help economies grow and prosper.”
Since 1961, the average Canadian family’s total tax bill has increased by 1,832 per cent, dwarfing increases in shelter costs (1,375 per cent), clothing (620 per cent) and food (546 per cent).
Even after accounting for changes in overall prices (inflation) over the period, the tax bill has shot up 147 per cent.
“Governments — federal, provincial, and local — have increased the scope of taxation in Canada relative to 50 years ago. In other words, they have increased tax rates on existing taxes and enacted new ones altogether,” said Lammam.