Average Canadian family spending more on taxes than basic necessities, Fraser Institute says

Nationalpost.com
Aug. 27, 2015
By Victor Ferreira

The average Canadian family continues to spend more on taxes than they do on food, shelter and clothing combined, according to the Fraser Institute’s annual study of taxation in Canada.

The think-tank’s Canadian Consumer Tax Index study released Thursday says a Canadian family earning $79,010 in 2014 would have spent 42.1 per cent of income on tax bills compared to 21 per cent of income on shelter, 11 per cent on food, and five per cent on clothing.

Although the 2014 numbers can still change as more data becomes available, the percentage of income used to pay taxes has continuously risen since 2008 when 40.9 per cent of income was spent.

Charles Lammam, co-author of the study, said the consistent tax increases mean Canadians continue to have less money to use in other avenues.

“As the tax bill grows, there is less money available for families to spend on things they want to spend on, to save for retirement or their kids education, or even to pay down their household debt,” Lammam said.

A key aspect of the Fraser Institute study is the comparison of current taxes to those in 1961. The study shows average families in 1961 earned an average of $5,000 and paid taxes worth $1,675. The average family’s tax bill rose by 1,886 per cent in that time, while food prices rose by 561 per cent and clothing by 819 per cent. The cost of shelter was the basic necessity that came closest to matching the increase seen in taxes, having risen by 1,366 per cent. Average annual income also increased at a slower rate than taxes, rising by 1,480 per cent.

The Fraser Institute determined taxes rose 149.2 per cent after inflation in that time period, as average families in 1961 would have only paid $13,353 in present day dollars.

The comparison marks a significant shift in how family income was divided, the study shows, as the average family only used 33.5 per cent of income on taxes and was able to spend 56.5 per cent of it on the basic necessities. Ten per cent was devoted to other spending.

Lammam said it’s important for Canadians to know the 2014 tax rate would be even higher - 44.2 per cent - when government overspending in 2014 is taken into consideration.

“They were spending more than the total revenue brought in and the difference has been borrowed. Essentially this difference between taxes and spending is a deferred tax.”

Even without considering the upcoming federal election, Lammam said Canadians should use the information to determine whether they’re getting value for the amount being paid.

“Independent of what’s happening politically, I think it’s important for Canadians to be armed with the information that we provided. Armed with that knowledge, Canadian families can then decipher whether they’re getting good, great, or not so great value for what they’re paying.”