Taxes consume more than 45% of household income for average Canadian family

At a time when affordability and the cost of living are top of mind for many families in Canada, it’s important to look at which household expenses are costing Canadian families the most. According to a recent study, taxes are the largest single expenditure for the average family, even bigger than expenditures on basic necessities.

Canadians pay various different taxes to federal, provincial and local governments. These include income taxes, payroll taxes, health taxes, sales taxes, property taxes, fuel taxes, carbon taxes, and the list goes on. Each year, we add up all of these items to calculate the total tax bill of the average Canadian family, which can then be tracked over time.

In 2022, the average family (including unattached individuals) earned cash income of $106,430 and paid total taxes equaling $48,199. This means the total tax bill of the average Canadian family in 2022 amounted to 45.3 per cent of its household income. This is larger than the combined 35.6 per cent of household income that families spent on food, clothing, and shelter.

Expenditures on housing, which are front and centre in the national affordability discussion, are less than half of what the average Canadian family paid in taxes. Indeed, the average Canadian family is estimated to spend roughly $22,380, or 21.0 per cent of their income, on rent or housing costs in 2022.

Canadian families haven’t always spent more on taxes than on basic necessities. In 1961 the average Canadian family paid taxes amounting to 33.5 per cent of income while spending 56.5 per cent of their income on basic necessities. Since then the total tax bill has increased by 198.8 per cent in inflation-adjusted terms, outpacing growth in both household income and expenditures on shelter, food, and clothing. Due to this growth, Canadians have spent a larger share of their household income on taxes than on basic necessities every year since 1993.

It’s clear that Canadians spend more on taxes than anything else—but what do they get for those dollars?

The total tax bill is essentially the price Canadians pay to receive government services. Recent polling data reveals that nearly half (44 per cent) of Canadians feel they receive poor or very poor value from the services they receive from governments such as health care, education, police, roads and national defence. Only 16 per cent believe they get good or great value. It seems Canadians aren’t convinced they’re getting bang for their buck when it comes to government services.

Governments across Canada appear convinced that more spending will solve affordability concerns for families, yet they continue to ignore the fact that the average family pays more in taxes than it does on basic necessities. Rather than increasing government spending, reducing the tax burden would put more money back in the pockets of Canadians.