The Fraser Institute

The Fraser Institute

April 24, 2008 06:00 ET

The Fraser Institute: Total Tax Bill for Average Canadian Family Has Increased by More Than 1,700 Per Cent Since 1961

VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 24, 2008) - The total tax bill of the average Canadian family has increased by more than 1,700 per cent since 1961, according to a new book, Tax Facts 15, released today by independent research organization The Fraser Institute.

Canadians' total tax bill now accounts for more of the family budget than food, clothing and shelter combined. In contrast to the jump in taxes, the average family's expenditures on shelter increased by 1,063 per cent, food by 505 per cent and clothing by 455 per cent.

"Taxes have crept into virtually every aspect of Canadians' daily lives," said Niels Veldhuis, co-author of Tax Facts 15 and director of fiscal studies at the Fraser Institute.

"As a result, the average Canadian family's biggest total expense is taxation. Families are paying more in taxes than they spend on food, clothing, and shelter."

Tax Facts 15 provides a wide-ranging overview of Canada's tax system and the amount of taxes Canadians pay including direct taxes such as income taxes, Employment Insurance and Canadian Pension Plan contributions, and indirect or "hidden" taxes such as sales taxes, excise taxes on tobacco and alcohol, amusement taxes, and gas taxes. The book also contains an update of the popular Canadian Consumer Tax Index, which tracks the total tax bill of the average Canadian family over time.

In 2007, the average Canadian family earned $66,496 and paid $30,213 in total taxes. On a percentage basis, the average Canadian family gave 45.4 per cent of its income to governments in the form of taxes while spending 34.9 per cent of its income to provide itself with food, clothing, and shelter.

Back in 1961, the average family earned $5,000 and paid just $1,675 in taxes. That works out to 33.5 per cent of its income spent on taxes while 56.5 per cent was spent on food, clothing and shelter.

Veldhuis points out that most Canadians are aware that income taxes are the single largest tax they pay, but many don't realize that income tax represents less than half of their total tax bill. Income taxes accounted for only 34.7 per cent of the taxes the average Canadian family paid in 2007. Two-thirds of an average family's tax bill is made up of many hidden or indirect taxes that are often built into the price of goods and services and identified to the final consumer as a tax.

"As Canadians grapple with the stress and anxiety of completing their income tax returns, any discussion of taxes naturally tends to focus on income taxes. But personal income taxes account for slightly more than one-third of the total tax bill faced by the average Canadian family in 2007 with a wide array of hidden and indirect taxes making up the remainder," Veldhuis added.

Tax Facts 15 also addresses the claims by some in the media and many social-activist groups that "the rich" pay no taxes. An examination of the relative income and tax position of Canadians shows that the largest portion of the tax burden ultimately settles on higher income groups.

In 2007, the top 30 per cent of families earned 60.1 per cent of all income in Canada and paid 65.9 per cent of all taxes. The bottom 30 per cent earned 8.4 per cent of all income and paid 4.8 per cent of all taxes. A Canadian family is included in the top 30 per cent when its income exceeds $81,501.

The income mobility of Canadians is an important part of any discussion about the fairness of Canada's tax system. Most young people start out in the low-income group and work up to the middle or high-income group. Given their initial lack of experience, their incomes start out low. Their incomes peak when they hit middle age (the prime earning years) and then begin to fall as they approach retirement.

"Over time, there is much less inequality than a snapshot of the income distribution at any one time suggests," Veldhuis said.

"Income mobility data have repeatedly shown there is not a permanent underclass in Canada stuck in a low income group."

The book also demonstrates how the Canadian tax system penalizes someone who works their way up the income ladder during their career.

"Canada's progressive tax system imposes an ever increasing burden on people as they earn more income," Veldhuis said.

"Clearly Canada's tax system is sending the wrong message when it penalizes people for being successful."

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Tampa, 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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