Taxes remain largest expense for Canadian families
As housing and food prices continue to rise, many Canadians likely assume that these are the most expensive budget items for families. But in fact, the average Canadian family spends more on taxes than housing, food and clothing combined.
To understand the full cost of taxation, beyond the income and payroll tax deductions on our paycheques, are we must consider all taxes-both visible and hidden—that we pay throughout the year to federal, provincial and municipal governments including property taxes, carbon taxes, sales taxes, alcohol taxes, import taxes and so on. Together, these taxes comprise a family’s total tax bill.
Again, even during the pandemic, though tax revenues decreased for governments nationwide, taxes remained the single largest household expense for Canadian families. Last year, the average Canadian family (including single Canadians) earned $96,333 and paid $35,047 in total taxes—that’s 36.4 per cent of their income going to taxes—compared to $34,105 (or 35.4 per cent of their income) on housing, food, and clothing combined.
For another comparison, consider that annual housing costs (including rent and mortgage payments) for the average Canadian family amounted to $20,023 or 20.8 per cent of their income, which means the average Canadian family spends nearly twice as much on taxes than on housing.
Our total tax bill has also grown markedly over the decades. Since 1961, the average Canadian family’s total tax bill has increased nominally by 1,992 per cent, dwarfing increases in annual housing costs (1,671 per cent), clothing (629 per cent) and food (767 per cent).
And yet, the average Canadian family could see their tax bill grow higher in future years.
The federal and provincial governments have reverted to deficits to finance their spending in recent years, especially during COVID. Of course, taxes must one day pay for these deficits. Canadian families can expect to see tax increases imposed at some point in the future because governments will need to pay for today’s deficits and cover tomorrow’s debt interest payments. Indeed, the tax bill will likely climb higher than 36.4 per cent of the average family’s income.
Finally, budget deficits—including at the federal level—are expected well after the pandemic ends. On the campaign trail, federal parties of all political stripes are proposing that Canada continue running large deficits for the foreseeable future. For instance, the Conservatives target a return to budget balance budgets by the end of the decade while the governing Liberals have yet to make any commitment at all. Politicians have seemingly decided it’s easier to spend today and defer the cost of that spending to future generations by borrowing. Tax increases are likely on their way; we just don’t know when it will happen.
Taxes imposed by all three levels of government represent the single largest household expense for the average Canadian family. Indeed, the total tax bill eats up more of their income than housing, food and clothing combined. What’s more concerning, however, is that today’s deficits mean Canadian families are likely to be burdened with even higher tax bills in the future.
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