By Charles Lammam
and Milagros Palacios
The Fraser Institute
With home prices rising across the country, many may assume that housing costs (including rent and mortgage payments) are the most expensive budget item for the average Canadian family.
In reality, the average Canadian household spends more on taxes than any other expense – including housing. In 2016, the average Canadian family (including single Canadians) earned $83,105 in income and paid $35,283 in total taxes. That’s 42.5 percent of income going to taxes.
For most of us, the income and payroll tax deductions on our paycheques don’t total anything close to this percentage. But to understand the full cost of taxation, you must consider all the taxes – visible and hidden – that we pay to federal, provincial and municipal governments. Those include sales taxes, property taxes, fuel taxes, carbon taxes, import taxes, alcohol taxes and much more. These add up to make our overall tax bill expensive.
So how does the overall tax bill compare to housing costs?
The average Canadian family spends 22.1 percent of its income on housing – only about half as much as it spends on taxes.
In fact, taxes consume more of the average family’s income than all the basic necessities of life combined. The average family’s spending on housing, food and clothing in a year averages 37.4 percent of its income.
Canadian families may rightfully wonder whether they get good value for their tax dollars. Of course, taxes fund important government services. But we shouldn’t simply assume that higher taxes always provide better government services.
While it’s up to Canadians to decide if they get the best bang for their money, you need to know how much you pay in total taxes to make an informed assessment.
In most provinces, more than 50 percent of your tax dollars finance generous pay for government employees. Government employees, on average, receive 10.6 percent higher wages than private-sector workers doing similar work. And that’s on top of the much more generous non-wage benefits (pension coverage, job security, early retirement) the government sector enjoys. Of course, we need qualified and well-paid government workers, but is this pay and benefit premium the best use of our tax dollars?
Health care consumes around 40 percent of most provincial budgets and is a fast-growing expense. International comparisons show that, despite high levels of spending, Canadians have comparatively poor access to technology and doctors, and endure longer wait times for surgery. It’s hard to see how we get good value for our money in public healthcare when measured against other countries that also offer universal access.
Most troubling is when our tax dollars are outright wasted on boondoggles and failed government programs. A recent study documented more than 600 cases where the federal government failed to meet its own objectives over a 25-year period, resulting in up to $197 billion of wasted tax money.
If Canadians are more informed about the true cost of government, they’ll be better equipped to hold government accountable for how it spends our tax dollars. And that leads to a more robust public debate about the overall tax burden and whether we get our money’s worth.
Charles Lammam and Milagros Palacios are co-authors of the Fraser Institute report, Taxes versus the Necessities of Life: The Canadian Consumer Tax Index 2017 edition, available at www.fraserinstitute.org