The Fraser Institute

The Fraser Institute

June 05, 2009 06:00 ET

The Fraser Institute: Canadians Celebrate Tax Freedom Day on June 6 in 2009, Three Days Earlier Than 2008

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 5, 2009) - Tax Freedom Day falls on June 6 this year, meaning the average Canadian family had to work more than five months in 2009 to pay the total tax bill levied on them by all levels of government, according to the Fraser Institute's annual Tax Freedom Day calculations.

If Canadians were required to pay all of their taxes up front, they would have to pay each and every dollar they earned to governments prior to Tax Freedom Day. The report, Canadians Celebrate Tax Freedom Day on June 6, and a short, light-hearted Tax Freedom Day music video are available at

"Tax Freedom Day provides Canadians with a clear, easy to understand, and accurate estimate of the total amount of taxes they pay to all levels of government," said Niels Veldhuis, Fraser Institute Director of Fiscal Studies.

"The total tax bill paid by Canadians is much more than income tax. The reality is, the total tax bill assessed by all levels of government requires almost 43 per cent of an average family's annual income."

The taxes used to compute Tax Freedom Day include income taxes, property taxes, sales taxes, profit taxes, health, social security and employment taxes, import duties, license fees, taxes on the consumption of alcohol and tobacco, natural resource fees, fuel taxes, hospital taxes and a host of other levies.

An Earlier Tax Freedom Day

This year Tax Freedom Day falls three days earlier than 2008, when it was June 9. The latest Tax Freedom Day in Canadian history was in 2000, when it fell on June 24.

While the federal government recently provided some minor tax relief, most notably increasing the basic personal exemption for income tax as well as various new or expanded tax credits, and some provinces decreased taxes in 2009, Veldhuis points out that these actions are not the primary reason for the earlier Tax Freedom Day.

When the economy slows and incomes stagnate or decline, an average family's tax burden tends to be reduced to a greater extent than its income. The reason for this accelerated decrease in the tax burden compared to income is the progressive nature of Canada's tax system.

"Under our progressive tax system, families pay more proportionately in taxes as they earn more income. The reverse is also true. It is this reverse phenomenon that is driving much of the decrease in Tax Freedom Day," Veldhuis said.

Budget Deficits

Canadians may be thinking about the economic and tax implications of the government's recent return to budget deficits. Indeed, most federal and provincial governments are forecasting budget deficits for 2009. But today's deficits must one day be paid for by taxes. Deficits should therefore be considered as deferred taxation. For this reason, the Fraser Institute calculates a Balanced Budget Tax Freedom Day, the day on which Tax Freedom Day would fall if governments were obliged to cover current expenditures with current taxation and were not able to defer any of the tax burden by running a deficit.

Under this scenario, Balanced Budget Tax Freedom Day arrives on June 25 - 19 days later than Tax Freedom Day.

"By running substantial budget deficits, Canadian governments of today are accumulating debt. Eventually, the debt must be paid and we could see Tax Freedom Day move later in the calendar as a result," Veldhuis said.

Tax Freedom Day Among the Provinces

Tax Freedom Day varies from province to province, depending on the taxation levels of provincial and local governments. Alberta continues to enjoy the earliest Tax Freedom Day on May 16, followed by New Brunswick on May 31, then Ontario on June 1. Next comes Prince Edward Island on June 3, followed by Manitoba (June 7), British Columbia (June 8), Nova Scotia (June 11), and Quebec on June 12. Newfoundland and Labrador has the second-latest Tax Freedom Day, June 16, surpassed only by Saskatchewan where Tax Freedom Day falls on June 20.

There is a also an ongoing question as to whether natural resource royalties are actually a tax or simply the conversion of an asset (natural resources such as oil and gas) into an income stream for the province. If natural resource revenues are excluded, Tax Freedom Day is 18 days earlier in Newfoundland and Labrador, 16 days earlier in Saskatchewan, six days earlier in Alberta, and four days earlier in British Columbia.

Total Tax Bill

In 2009, the average Canadian family (with two or more individuals) will earn $88,432 and pay a total of $37,699 in taxes, for a total tax bill amounting to 42.6 per cent of its income.

Income for the average Canadian family will decrease by 2.5 per cent ($2,245) between 2008 and 2009 with the total tax bill also decreasing by 4.7 per cent ($1,846).

"There's no doubt our taxes pay for some essential government services. But the debate Canadians need to have is: are we are getting value for our tax dollars? In order to discuss that question in a rational way, we need to have a clear idea of the price we pay for government services. In other words, what is our total tax bill?" Veldhuis said.

Canadians can calculate their personal Tax Freedom Day using The Fraser Institute's Personal Tax Freedom Day Calculator at

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Toronto, and Vancouver. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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