A recent CBC News poll reported that the cost of living is one of the biggest issues worrying Canadians today. And yes, while trend inflation has been very low for a decade, it’s ticking up sharply.
So although it’s easy to understand why Canadians are anxious about the rising cost of basic necessities, the growing tax bill for families might be even more concerning.
According to the poll, the cost of living was the number one concern for 32 per cent of all Canadians surveyed. Most respondents claimed the price of basic needs such as food, electricity and housing were the main sources of apprehension.
In 2017, for example, the average Canadian family spent $17,856 on housing, $9,121 on food and $3,620 on clothing. Basic necessities cost the average family $30,597 or 35.6 per cent of their annual income. Since 1961, average expenditures on food, shelter and clothing have grown in nominal terms by about 1,000 per cent!
So the anxiety felt by many families is understandable.
What’s as bad or worse for us, though, is that the growth in the tax bill for families has also come at an astonishing pace, and apparently flown under the radar in recent years.
Taxes have increased much faster than basic necessities. In 2017 the average family paid $37,058 or 43.1 per cent of their income in taxes. For context, the average Canadian family paid 33.5 per cent of its income on taxes in 1961. Since then, total taxes have increased for the average family by 2,112 per cent, including inflation, which is double the increase in basic necessities over that time.
This means the average Canadian family now pays more of its income on taxes than it spends on basic necessities, including food, housing and clothing. The tax bill for Canadian families is nearly $6,500 higher than the average expenditure on basic necessities.
Things get more troubling.
Despite promising to reduce taxes for middle-class Canadian families, since coming into office the government of Prime Minister Justin Trudeau has increased the tax burden for 81 per cent of middle-income families (with household incomes between $77,089 and $107,624).
On average, and allowing for the middle-class rate-cut centrepiece of the government’s plan, the targeted families now pay $840 more in taxes than four years ago. This increase in taxes is primarily due to the removal of several tax credits families previously claimed for income splitting, public transit and children’s fitness, among others.
The bottom line?
The total tax bill for Canadian families has increased much more rapidly than any other single expenditure.
After adding up all the taxes paid and expenditures on basic necessities for the average Canadian family, that doesn’t leave much for saving, registering children for sports, buying a vehicle, paying for gas and every other family expense.
It’s no surprise, then, that the rising cost of living is a source of anxiety for Canadians. And the tax bill for families is increasing at an even faster pace.
Worried, anxious people aren’t happy people and that might be the root finding of the CBC poll.
Jake Fuss and Finn Poschmann are analysts at the Fraser Institute
Republished under arrangement with the Asian Pacific Post