In 2023, the average Canadian family paid
46 percent of its annual income in taxes—
including income taxes, property taxes, payroll taxes, sales taxes, carbon taxes, and more, says Jake Fuss, director of fiscal studies at the Fraser Institute think tank.
“And that’s before any of the increases that we’re going to see in 2024,” he told The Epoch Times.
A slew of tax hikes are coming through, including at the
federal level a rise in Canada Pension Plan (CPP) and Employment Insurance (EI) contributions and in the carbon tax, alcohol tax, and more. On the municipal level, many major cities are seeing big property tax hikes.
This all adds financial strain on families, Mr. Fuss said, but it also has impacts beyond that. High taxation makes Canada uncompetitive compared to other countries, he said, and it’s also important to consider where those tax dollars are going and whether Canadians are getting value for their money.
The Tax Increases
Toronto is looking at a proposed property tax hike of 10.5 percent as part of its 2024 budget, and its city council says this could rise to 16.5 percent if additional federal funds for refugee housing don’t come through.Vancouver approved its 2024 budget with a 7.5 percent property tax increase, after a 10.7 percent hike in 2023. Halifax is looking at a proposed property tax hike of 9.7 percent. Montreal raised its property tax nearly 5 percent this year, the largest hike in 13 years. The Canadian Taxpayers Federation (CTF) summed up various federal tax hikes in its 2024 New Year’s Tax Changes
report published in December.
It highlighted increases in 2024 federal income tax payments for nearly every Canadian. The total increase, including higher contributions to CPP and EI, amounts to $347 for anyone with an income higher than $73,200. For incomes lower than that, the total increase is between $9 and $18.
Employers will also bear increased costs as they pay their share of the higher CPP and EI. Self-employed Canadians will see roughly double that increase, almost $700, as they pay both the employee and employer share.
The federal carbon tax is set to increase from $65 per tonne to $80 per tonne on April 1. That will cost the average household between $377 and $911 in 2024–25, even after rebates, says CTF, citing Parliamentary Budget Officer (PBO) data.
Taxes already account for half the price of beer, 65 percent of the price of wine, and over three-quarters the price of spirits, CTF said, but the
federal alcohol tax will further increase 4.7 percent this year on April 1.
A
digital services tax not yet implemented could cost taxpayers a combined $1.2 billion in 2024–25, CTF says, citing PBO data.
The federal government announced
related legislation in November 2023, but it is unclear when a digital services tax could come into effect. It’s aimed at large companies operating online marketplaces, such as Amazon, Uber, and Airbnb. But companies are likely to pass that extra cost along to consumers rather than pay it themselves, as happened after similar legislation in France, CTF said.
Value for the Tax Dollars
“Taxes obviously do pay for important public services, but we also need to consider where the money is going and how effective that spending is,” Mr. Fuss said. “If we look at health-care spending, for instance, that’s grown considerably in recent years, but our wait times in Canada are still quite long, especially in
comparison to other universal health-care countries.”
He cited a
Leger poll the Fraser Institute commissioned in 2023 which found that 44 percent of Canadians feel they receive poor or very poor value from government services. The poll also found that 74 percent of Canadians surveyed think the average family is being over-taxed by the federal, provincial, and local governments.
As federal debt has ballooned, a large amount of taxpayer dollars is going to debt interest alone, as Mr. Fuss noted in a report
he recently co-authored looking at Canada’s economic policy since 2015. The report says interest costs are projected to reach $46.5 billion in fiscal year 2023–24.
The cost of running the federal government has also increased due to a swelling bureaucracy. The PBO highlighted this cost in an April 4, 2023,
report, noting a 30.9 percent increase in personnel spending over the previous two years, from $46.3 billion in 2019–20 to $60.7 billion in 2021–22.
Other big-ticket federal spending includes items such as the early learning and
child-care plan designed to provide
$10-a-day daycare, which is estimated to incur a net federal cost of $6.4 billion in 2024–25 and $7.6 billion in 2025–26, according to a
2022 PBO assessment; and
dental care, estimated in Budget 2023 at $13 billion over five years and then $4.4 billion annually.
In addition, a
pharmacare plan, not yet in place, is estimated to cost some $11.2 billion in 2024–25, rising to $13.4 billion in 2027–28, federal and provincial funding combined. Moreover, federal production subsidies for the Stellantis-LGES and Volkswagen
electric vehicle battery plants in Ontario total $18.8 billion, with an additional $9.4 billion provided by the provincial government.
Competitiveness, Reform
Looking at the top personal income tax rate of each of the
38 Organisation for Economic Co-operation and Development (OECD) member countries, Canada had the
fifth-highest tax rate, federal and provincial rates combined, for those in the top income tax bracket in 2022, Mr. Fuss said.
Across all tax brackets, Canada is not competitive with the United States, he said.
He suggests big reforms, not just “incremental, ad hoc changes at the margin,” to corporate and personal income tax rates to increase Canada’s competitiveness.
The tendency to add tax credits instead of lowering rates is problematic, he said. It adds to the complexity of the tax system, for example.
That complexity has been growing for a long time. Income tax was first introduced in Canada in 1917. At the time, the Income Tax Act was only 6 pages long, compared to 1,412 pages by 2017, according to an
essay included in a collection of essays on the history of Canada’s personal income tax, compiled and edited by the Fraser Institute in 2017.
The tax form was just 23 lines long in 1917 but had grown to 328 lines by 2015, says the essay, which was authored by François Vaillancourt, a professor emeritus of economics at the Université de Montréal, and Charles Lammam, then the Fraser Institute’s director of fiscal studies.
“We’ve seen the tax code grow significantly over time, meaning there’s more rules that people have to follow. That means that people have to get accountants and lawyers involved,” Mr. Fuss said. “Ultimately, it’s a very costly and time-consuming process.”
