By Jake Fuss
and Milagros Palacios
The Fraser Institute
Providing tax relief for Canadian families has been a stated priority for the government of Prime Minister Justin Trudeau since it assumed office. However, despite any rhetoric to the contrary, the tax burden for the average Canadian family has increased over the last four years.
And it’s clear now that Trudeau must change course if tax relief remains a goal for this government.
Since 2015, this government has enacted a series of tax increases on Canadian families. It introduced a carbon tax, raised payroll taxes and removed several personal income tax credits, including income splitting, the children’s fitness tax credit and the public transit tax credit.
Whether you agree with those measures or not, these changes have increased the average family’s tax burden.
Each year, the Fraser Institute measures the average Canadian family’s tax burden to demonstrate how it’s changed over time. Canadians pay many different taxes to federal, provincial and local governments. Some of these taxes are visible but many are hidden, which adds to the confusion about how much we actually pay.
Not only do we pay income taxes, we also pay property taxes, payroll taxes (including the Canada or Quebec Pension Plans tax), health taxes, sales taxes such as the GST, carbon taxes, taxes on gasoline, taxes on imported goods, ‘sin’ taxes and so on.
Adding up all the taxes isn’t easy. But in 2019, we estimate the average Canadian family (consisting of two or more people) will pay $52,675 in total taxes – or 44.7 per cent of their $117,731 income. Of the total amount of taxes paid, 53.2 per cent will go to the federal government.
If you paid all your taxes for 2019 up front, you’d give the government every dollar you earned before June 14, which is what we call Tax Freedom Day. After working the first 164 days of the year for government, you’re finally working for yourself and your family.
Tax Freedom Day in 2015 arrived two days earlier, on June 12. For the average Canadian family, the federal portion of their total tax bill has increased by 10.5 per cent over the last four years. So the federal tax burden for Canadian families is higher today than when this government took office in 2015.
And the total tax burden on Canadian families grows even larger after we account for the federal government’s deficit problem.
Despite the increasing levels of taxation over the last four years, this government has not been able to fully finance its spending preferences. This year, the federal government is projected to spend nearly $20 billion more than it collects in revenue.
Who will pay that $20 billion?
Future taxpayers. A deficit today is nothing more than a tax deferred to a later date.
By kicking today’s debt down the road, the federal government is passing the burden of repayment to young Canadian families. In fact, if Canadian governments at all levels raised taxes to balance their budgets instead of financing spending with budget deficits, Tax Freedom Day would arrive eight days later this year, on June 22.
The tax bill for the average family is rising and expected future tax increases will only exacerbate the issue.
Given the increasing tax burden on Canadian families, the government must re-evaluate its plans. So far, it has failed to deliver on the promise of meaningful tax relief.
Jake Fuss and Milagros Palacios are analysts at the Fraser Institute.