Will governments back off their taxing trend in 2014?
A new year can bring new possibilities. Its a chance to take stock of what weve accomplished in the past year and to set new goals for the future. Its also, however, when Canadian governments typically enact new taxes. Unfortunately, governments across the country in recent years have been all too keen to bring in new taxes or increase existing ones, resulting in squeezed household budgets. The question for 2014 then, is will this trend continue or will governments recognize its time to give taxpayers a break?
For several decades the Fraser Institute has been calculating Tax Freedom Day which is an easy-to-understand measure of the total tax burden imposed on Canadian families by the federal, provincial, and local governments. Tax Freedom Day covers a wide range of taxes and provides an estimate for when in the year the average family has earned enough income to pay the total tax bill imposed on it by government.
In 2013 Tax Freedom Day fell on June 10, two days later than in 2012, and three days later than in 2011. In fact, Tax Freedom Day has been arriving later and later since 2009.
The steady delay is partly driven by Canadian governments increasing taxes. This past year alone the federal government raised Employment Insurance premiums, Quebec increased payroll and personal income taxes, British Columbia raised health care premiums for families and individuals and its corporate income tax, New Brunswick increased all four of its personal income tax rates, Manitoba raised its provincial sales tax, Ontario increased its top tax rate on high-income earners, Saskatchewan cancelled a scheduled decrease in the general corporate income tax rate, and Prince Edward Island hiked its small business income tax rate.
These are just a handful of the tax hikes endured by Canadians in 2013. According to our 2013 Tax Freedom Day calculations, the average family earned $97,254 in income last year and paid a total of $42,400 or 43.6 per cent of its income in taxes.
Yet the trend of governments increasing taxes seems poised to continue in 2014. As of January 1, the federal government increased taxes on certain dividend income, British Columbia raised its health care premiums yet again and introduced a new tax rate for those earning more than $150,000, and a host of Canadian municipalities such as Montreal, Toronto, Edmonton, Vancouver and Winnipeg are raising local taxes.
With the federal and provincial governments tabling budgets in the coming months, there very well may be more tax hikes before the year is complete. The Ontario government, for instance, has recently mused about introducing a new payroll tax to fund a made-in-Ontario public pension program and new taxes for increased transit spending.
If the trend of tax increases does indeed continue, Canadians will end up working more for the government and less for themselves and their families.
That begs the question: is the current mix of government programs and services worth working until June 10 or later to pay for it? Of course different people have their own personal views. But therein lies the value of our Tax Freedom Day research; it shows where the current trend is headed and leaves it to Canadians to ultimately decide for themselves whether the tax burden is too high.
Our Tax Freedom Day calculations for 2014 will provide fresh insight into where we are headed and will show if governments are maintaining the trend of increasing taxes in the new year or reversing it by lowering the tax burden on Canadian families.
The early signs though are not encouraging and suggest a growing share of family income will continue to go to government. But with budget season on the horizon, there is an opportunity for governments to change course and begin taking steps to reverse the trend. Many Canadian families would no doubt welcome a lighter tax burden from all levels of government. That would be a worthy New Years resolution for 2014.
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