Fraser Forum

42 per cent of income goes to taxes—some 'value' perspective for Canadian families

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The Toronto Star editorial board yesterday discussed our recent study finding that the total amount of taxes paid by the average Canadian family now consumes over 42 per cent of income—more than the 38 per cent spent on food, clothing, and housing all combined.

The editorial is wrong on many points but it correctly notes that “we ought to consider what we get in return [for taxes] before deciding whether or not it’s a bad thing.” The Star seems to take for granted that Canadians are aware of how much they pay in total taxes, something that’s needed to make an informed assessment about whether they are content with what they receive from government. You need to know how much something costs before assessing whether you get good value.

It’s actually not so straightforward because different levels of government levy such a wide range of taxes, some of which are visible, while others are hidden. Therein lies the value of our calculations. They give Canadians a clear sense of the cost of government.

While we leave it to Canadian families to decide whether they’re getting the best value for their tax dollars, some perspective might help.

In most provinces, more than 50 per cent of their tax dollars are used to finance overly generous pay for government employees. In fact, government employees, on average, receive 9.7 per cent higher wages than comparable 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 also enjoys.

In the case of health care, which consumes more than 40 per cent of provincial budgets and is a fast-growing expense, international comparisons consistently show that despite a high level of spending, Canadians have comparatively poor access to technology and doctors, and longer wait times for surgery. It’s hard to see how we’re getting the best value for money in public health care when measured against other countries that also offer universal access.

And then there’s spending on public schools, a key item financed by our tax dollars, which continues to go up and up, even though public school enrollment across the country continues to decline. Of the increase in public education spending over the decade ending in 2012/13, teacher compensation (wages, benefits, and pensions) accounted for the overwhelming majority.

Most troubling, however, is when tax dollars are outright wasted on boondoggles and failed government programs. Consider the findings from a recent study that 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. Even the Star concedes “there’s waste and inefficiency in government that ought to be addressed.”

There’s no doubt that we need taxes to fund important government services. But we shouldn’t simply assume higher taxes always provide better government services.

 

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