The Fraser Institute

The Fraser Institute

April 19, 2010 06:33 ET

The Fraser Institute: Taxes for Average Canadian Family Have Increased at Faster Rate Than Costs of Food, Clothing and Housing

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 19, 2010) - The total tax bill for the average Canadian family has increased at a much faster rate since 1961 than any other single household expenditure, according to a new study released today by the Fraser Institute, Canada's leading public policy think tank.

The Canadian Consumer Tax Index 2010, which calculates the total tax bill of the average Canadian family, found that taxes have increased by a whopping 1,624 per cent since 1961. In contrast, expenditures on housing increased by 1,198 per cent, food by 559 per cent, and clothing by 526 per cent from 1961 to 2009.

"Taxes have grown much more rapidly than any other single expenditure item for Canadian families to the point where taxes from all levels of government take a greater part of a family's income than basic necessities such as food, clothing, and housing," said Niels Veldhuis, the study's co-author and the Institute's senior economist.

"With most Canadians filing their income tax returns at this time of year, it's important to remember that Canadian families are required to pay a myriad of additional and hidden taxes. In fact, personal income taxes accounts for only one third of the total tax bill paid by the average Canadian family in 2009."

Much like the Consumer Price Index calculated by Statistics Canada which measures the average price that consumers pay for the goods and services that they buy of their own choice, the Canadian Consumer Tax Index measures the price of goods and services that government buys on behalf of Canadians.

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

This year's index shows that even though family incomes have increased significantly since 1961, the total tax bill has increased at a much higher rate.

  • In 2009, the average Canadian family earned an income of $69,175 and paid total taxes equaling $28,878—41.7 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.

"Taxes have become the most significant item that Canadian consumers now face in their budgets," Veldhuis said.

Impact of the recession

The recent recession resulted in a small decrease in the total tax bill for the average Canadian family because an average family's tax burden is reduced during economic slowdowns. The result was a dip in the total tax bill in 2009 to $28,878 from $30,362 in 2008.

But Veldhuis points out that government deficit spending incurred in the past year are in reality, unpaid debts that must eventually be paid through taxes.

"When we include deferred taxation – deficits – we see the total tax bill for the average Canadian family is actually $31,714 in 2009. This means Canadian families are facing a future tax bill of an additional $2,836," he said.

The Canadian Consumer Tax Index attempts to answer the question: How has the tax burden of the average family changed since 1961?

In 1961, the average family had to spend 56.5 per cent of their cash income to obtain food, clothing, and housing. In the same year, 33.5 per cent of the family's income went to governments as tax.

By 1981, the situation had been reversed; governments took 40.8 per cent of the income in the form of taxes, while the family used 40.5 per cent to buy food, clothing and housing.

By 2009, the average family was giving 41.7 per cent of its income to governments for taxes while using 37.1 per cent of its income to buy the necessities of life—food, clothing, and housing.

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The Fraser Institute is an independent research and educational organization with locations across North America and partnerships in more than 70 countries. 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 www.fraserinstitute.org

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