Think tank conjures massive tax burden

The average Canadian family pays more in taxes than it does on the necessities of life, according to a study released by the Fraser Institute. Of course, this depends on what you consider a tax—and how you define “necessity.”

According to the study, the average family had an income of $72,393 in 2010, and spent 41.3% of that income on its overall tax bill. The total spent on food, clothing and shelter accounted for 34% of the average income.

“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.

Veldhuis points out that in 1961, the total tax bill accounted for just 33.5% of income, while food, clothing and shelter gobbled up 56.5%.

Of course, in 1961, families had additional necessities of life to pay for, like healthcare. While most provinces covered some healthcare costs by 1961, universal healthcare was not introduced until 1966, with the passage of the federal Medical Care Act.

Today, most Canadians would consider their provincial health insurance to be a necessity.

The calculation of total taxes paid went beyond the obvious—income tax and sales taxes—to include import duties, excise taxes on tobacco and alcohol, amusement taxes and gas taxes.

But the study also included Employment Insurance and Canada Pension Plan (CPP) contributions, which, while collected by the government, are not exactly taxes. The CPP is no more of a tax than a corporate pension is a “product” sold by employers to their staff.

Adding these separately managed social programs to the tax total, the Fraser Institute study concluded that the average Canadian family’s tax burden increased 1,686% since 1961, while shelter costs increased 1,175%, and food and clothing costs increased by 498% and 510%, respectively. Meanwhile, the Consumer Price Index increased by 642%.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.