Canadian tax burden too big for families?

It's not a favorite time of year for Canadians when the Taxman cometh, and if you believe a new report by the Fraser Institute the average family is spending more on taxes than basic necessities such as food, shelter and clothing.

The think tank’s Canadian Consumer Tax Index, published this week, found the average Canadian household spends 42.7 per cent of its income on taxes. That compares to the 36.9 per cent spent on food, shelter and clothing combined.

Charles Lammam, associate director at the institute and co-author of the study, says the key takeaway is to alert Canadians to the massive tax burden, which has ballooned some 1,787 per cent in nominal terms between 1961 and 2012.

"The first take away is the tax burden," says Lammam. "Then we can start thinking about, as Canadians, are we getting value for our tax dollars."

For example, a big chunk of Canadians' tax money goes toward health care, but Lammam says the public is not getting enough bang for our buck on that front. He noted countries like Australia and Switzerland have universal healthcare, and are seeing better value.

"These countries are spending as much or less and they're getting better outcomes in terms of access to technologies, access to doctors and nurses. They don't wait as long for surgeries," he says.

The study shows in 2012, 1961, the average Canadian family earned income of $5,000 and paid $1,675 in taxes, for a tax bill representing some 33.5 per cent of total income. Comparatively, in 2012, the average Canadian family earned an income of $74,113 and paid $31,615 in taxes, for a tax bill representing nearly 43 per cent of total income.

Iglika Ivanova, an economist at the B.C. office of the Canadian Centre for Policy Alternatives, questioned the methodology of lumping together the entire amount of tax revenue that the Canadian governments collects, as well as personal and business taxes, import duties and resource royalties, to name a few, and then dividing that by the number of Canadian households.

"The methodology is too broad," she says, noting it factors in taxes that the average family does not pay, particularly if you factor in income gaps. Using the early 1960s as a starting point is meaningless because that period predates the advent of Medicare and the Canadian Pension Plan, along with major infrastructure projects, she adds.

As well, the report feeds on the public's fear that tax money simply goes into a black hole, as opposed to analyzing tax money in the context of the services it pays for such as schools, clean water, safe food, environmental protection, the building of roads, police and justice system, says Ivanova.

"We need to look at what these taxes buy. Just talking about taxes in isolation of the services, especially over a period of time of 50 years, is meant to make people feel they're paying too much," says Ivanova.

"That's just a big number that is thrown out there for shock value."

A 2007 report by the Canadian Centre for Policy Alternatives showed the total tax rate for middle-income families was around 35 per cent of income, with lower-income families paying less. Families in the top 1 per cent also paid less as a share of their income, said Ivanova.