By Dian Cohen
Quebec just celebrated its Fête Nationale – the official national holiday of the province. July 1 is Canada’s national day and is celebrated in Quebec partly because it’s a statutory federal holiday, partly because more than a million Quebecers self-identify as English-speakers and partly because it’s another reason for everyone to take a day off work and have fun in the sun.
The Fraser Institute, a libertarian organization that believes that free markets best allocate resources in an economy, does us a favor each year by publishing what it calls Tax Freedom Day — defined as “the day in the year when the average Canadian family has earned enough money to pay the taxes imposed on it by the three levels of Canadian government: federal, provincial, and local.” For Quebecers, that day this year is July 1. In other words, if we had to pay all of our taxes up front, we would have to work from January 1 to July 1 – 181 days – and give every dollar to government.
We all know how much we pay in income tax, and certainly we know there’s a sales tax. Even knowing how much the sales tax costs us would mean tallying up every purchase for a whole year. What else is there? Health taxes, property taxes, profit taxes, taxes on the consumption of alcohol and tobacco, fuel taxes, motor vehicle licence fees, carbon taxes, import duties, and natural resource fees. And, although businesses pay part of our payroll taxes like EI and QPP premiums, we end up paying the employer portion as well as our own because the cost of business taxation is ultimately passed on to us.
Tax Freedom Day for each province varies according to the extent of the provincially-levied tax burden. This year, the earliest provincial Tax Freedom Day fell on June 4 in Manitoba; the latest in Quebec on July 1. As for individual families, the Institute calculates averages. For an average Quebec family of two or more individuals, on average they made $115,000 and paid $55,400 in taxes. That’s a tax rate of 48%.
Since the Fraser Institute believes that minimal, or even no, government intervention is best for economic prosperity, it has done a few calculations based on the tax implications of the $86.0 billion in projected federal and provincial government deficits in 2022. They have calculated a Balanced Budget Tax Freedom Day, the day on which average Canadians would start working for themselves if governments had to cover current expenditures with current taxation. In 2022, the Balanced Budget Tax Freedom Day arrives for Quebecers on July 15.
The Institute tells us that “The overall distribution shows that Canada’s tax system is effectively progressive and extracts proportionately more money from those on the higher end of the income scale. Specifically, the top 20% pays 53.0% of all taxes while earning 44.6% of all income. At the other end of the income spectrum, the bottom 20% pays 2.1% of all taxes despite earning 5.2% of all income.”
As the Fraser Institute makes clear, “Tax Freedom Day is not intended to measure the benefits Canadians receive from governments in return for their taxes. Rather, it looks at the price that is paid for a product—government. Tax Freedom Day is not a reflection of the quality of the product, how much of it each of us receives, or whether we get our money’s worth. These are questions only each of us can answer for ourselves.”
In case you want to check it out for yourself: https://www.fraserinstitute.org/categories/tax-freedom-day
Dian Cohen, C.M., O.M., economist
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