The Fraser Institute

The Fraser Institute

June 05, 2009 06:00 ET

The Fraser Institute: Quebec Among Last Canadian Provinces to Celebrate Tax Freedom Day

MONTREAL, QUEBEC--(Marketwire - June 5, 2009) - Tax Freedom Day in Quebec falls on June 12, the third latest in Canada and ahead of only Newfoundland and Labrador and Saskatchewan, according to The Fraser Institute's annual Tax Freedom Day calculations.

Tax Freedom Day is the day in the year the average Quebec family has earned enough money to pay the taxes imposed on them by all levels of government. If Quebeckers 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 complete report is available at www.fraserinstitute.org.

"Tax Freedom Day provides Quebeckers 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.

"Quebeckers face one of the highest tax burdens in Canada. Next door in Ontario, taxpayers celebrate Tax Freedom Day 11 full days earlier than Quebeckers."

When calculations of tax rates are averaged over all of Canada, Tax Freedom Day falls nationally on June 6.

Among all Canadian provinces, Alberta enjoys 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), Quebec (June 12), and Newfoundland and Labrador on June 16. Saskatchewan has the latest Tax Freedom Day, on June 20.

However, if natural resource royalties are excluded from the calculations, Quebec, at June 12, has the latest Tax Freedom Day among all Canadian provinces. There is an ongoing debate 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 (May 29), 16 days earlier in Saskatchewan (June 4) , six days earlier in Alberta (May 10), and four days earlier in British Columbia (June 4).

Reasons for an Earlier Tax Freedom Day

Quebec's June 12th Tax Freedom Day comes four days earlier than 2008, when it fell on June 16.

But while the federal government has provided some minor tax relief in 2009, Veldhuis points out that these actions are not the primary reason for the earlier Tax Freedom Day, and indeed, the 2009 Quebec budget did not contain any significant tax relief.

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 Quebec'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

Recent budgets from both the federal government and Quebec's provincial government have seen a return to 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, Quebec's Balanced Budget Tax Freedom Day arrives on June 27 - 15 days later than its Tax Freedom Day.

"By running substantial budget deficits, Quebec's provincial government and the federal government 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.

Total Tax Bill

In 2009, the average Quebec family (with two or more individuals) will earn $74,767 and pay a total of $33,165 in taxes, for a total tax bill amounting to 44.4 per cent of its income.

Income for the average Quebec family will decrease by 1.1 per cent ($804) between 2008 and 2009 while the total tax bill decreases 3.6 per cent ($1,236). Most taxes decreased over the past year with the exception of property taxes, which increased by $57.

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.

Quebeckers can calculate their personal Tax Freedom Day using The Fraser Institute's Personal Tax Freedom Day Calculator at www.fraserinstitute.org

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 www.fraserinstitute.org.

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