Should we celebrate Tax Freedom Day?

If you’ve ever tried to calculate all the taxes you pay in a year to all levels of government, you’ve probably given up somewhere

Milagros Palacios and Charles Lammam, The Fraser Institute

If you’ve ever tried to calculate all the taxes you pay in a year to all levels of government, you’ve probably given up somewhere along the way. While most of us can easily decipher how much income tax we pay – it’s right there on our tax returns – it’s a lot more difficult to gauge how much we pay in not-so-obvious taxes.

For Canadian families to reasonably estimate their total tax bill they’d have to add up a dizzying array of taxes, including visible ones like income taxes, sales taxes, social security taxes, and property taxes as well as hidden ones like profit taxes, gas taxes, alcohol taxes . . . and the list goes on.

Not an easy task to calculate taxes

This is no easy task. That’s why the Fraser Institute calculates Tax Freedom Day every year. Tax Freedom Day is an easy-to-understand measure of the total tax burden imposed on Canadian families by federal, provincial, and local governments. If Canadians were required to pay all taxes up front, they would have to give governments each and every dollar they earned prior to Tax Freedom Day.

In 2012, we estimate that the average Canadian family consisting of two or more people will earn $94,258 and pay a total tax bill of $41,627 or 44.2 per cent of income.

This results in Tax Freedom Day falling on June 11. From then on, Canadians start working for themselves and their families rather than the government. While that alone is reason to celebrate, you may want to keep the champagne on ice because the good news ends there.

Tax Freedom Day arrives one day later than last year. And there are two main reasons for the delay.

First, several Canadian governments have increased taxes, from increased Employment Insurance premiums at the federal level, to a higher provincial sales tax in Quebec, to increased health taxes in British Columbia and a new tax on high earners in Ontario. Indeed, these and many other tax increases underscore a worrying trend across the country.

Second, Canada’s economy is still recovering from the recession and as incomes continue to increase, a family’s tax burden increases to a greater extent because of Canada’s progressive tax system, which imposes higher taxes as Canadians earn more money. For instance, the top fifth of income earners face an average total tax burden amounting to 54 per cent of income while the bottom fifth face an average burden of 18 per cent.

Don’t pop the cork just yet; there’s more bad news.

The federal and almost all provincial governments are running deficits this year. (Ottawa expects a deficit of $21 billion while the provinces cumulatively expect deficits amounting to $20 billion.) According to our calculations, Tax Freedom Day would come 12 days later this year (on June 23) if Canadian governments covered their current spending with even greater tax increases instead of borrowing the shortfall (debt).

It just keeps getting worse

It is important to remember that budget deficits incurred by Ottawa and the provinces must one day be paid for by taxes. With the recent significant growth in government debt across the country, Tax Freedom Day could come later in the future. By kicking today’s debt down the road, governments are passing on the burden of repayment to young Canadian families.

It is ultimately up to Canadian families to decide whether June 11 is an acceptable Tax Freedom Day. But therein lies the value of the calculation; it gives families important information to help make that assessment.

On that note, happy Tax Freedom Day, although maybe “happy” isn’t the right word.

Milagros Palacios and Charles Lammam are economists with the Vancouver-based Fraser Institute.

Troy Media

Just Posted

New Democrats would bring in $25 daycare if re-elected: Notley

Notley said the plan would include adding 13,000 daycare spaces

Supporters rally for Jason Kenney as UCP leader stops in Red Deer

Kenney promises equalization reform, stopping ‘Trudeau-Notley’ payroll hike, trade, economic mobility

WATCH: Fashion show highlights Cree designers

The fashion show was part of a Samson Cree Nation conference on MMIW

Rimbey RCMP need help identifying vandals

Plus, GPS in stolen vehicle helps locate it and the suspect in Red Deer

Ponoka Chamber to host election forum

All-candidates forum for Lacombe-Ponoka set for March 28 at the Ponoka Legion

The good, bad and the unknown of Apple’s new services

The announcements lacked some key details, such as pricing of the TV service

Morneau unveils principles for Indigenous ownership in Trans Mountain pipeline

The controversial pipeline was bought by Ottawa last year

Refugee who sheltered Edward Snowden in Hong Kong arrives in Canada

Vanessa Rodel and her seven-year-old daughter Keana arrived in Toronto this week

New UMSCA trade deal getting a boost from Trump, business groups

The trade deal is designed to supplant the North American Free Trade Agreement

Trudeau says he, Wilson-Raybould had cordial conversation last week

Trudeau denies anything improper occurred regarding SNC-Lavalin and the PMO

SNC-Lavalin backtracks on CEO’s comments surrounding potential job losses

Top boss had said protecting 9,000 jobs should grant leniency

Sources say Trudeau rejected Wilson-Raybould’s conservative pick for high court

Wilson-Raybould said Monday “there was no conflict between the PM and myself”

Social media comments continue to dog ranks of United Conservative candidates

Eva Kiryakos was running in Calgary-South East in the April 16 vote

Apple announces its long-awaited streaming TV service

The iPhone has long been Apple’s marquee product and main money maker, but sales are starting to decline

Most Read