- Comments (31)
- Text Size: Down Up
moneysense.ca, 15/06/08
Tax Freedom Day 2008
Current issue:
It’s an annual tradition for me to write about the Tax Freedom Day (June 25th in 2005, June 23rd in 2006 and June 18th in 2007) and rant about our high taxes. The Fraser Institute estimates that, in 2008, Tax Freedom Day fell on June 14th. The Institue’s report is a useful reminder of the sheer number and amount of taxes we pay and demand that all levels of government are careful with the public purse.
Some of the big ticket taxes we pay are obvious — federal and provincial Income tax, sales taxes like GST, PST or HST, EI premiums, CPP contributions, provincial health premiums and municipal property taxes — fall into the category. Less obvious is the “hidden” taxes — employer contributions to EI and CPP, liquor tax (which is the main reason why alcohol is much cheaper in the U.S.), tobacco tax, amusement tax, fuel tax, gasoline tax, land transfer tax, motor vehicle license tax, import duties, corporate taxes (which are ultimately borne by its owners) etc. Add it all up and the Fraser Institute reckons that an average Canadian family making $90,678 ends up paying $40,667 or close to 45% of their income in taxes. So much for a “temporary measure” introduced to fund the expenses of the First World War.
The good news is that our total tax burden has decreased in the past few years due to the cuts in the GST and lower income taxes at the federal level and in some provinces. On the not-so-good-news front, the municipal taxes are going up sharply in many Ontario cities.
moneysense.ca, 15/06/08
But of course they never point out the obvious flaws/self serving number manipulation they do to come up with “tax-freedom day”. For starters they include CPP & EI as “taxes” but they don’t include the income from those programs as income in their calculation. Apparently no one at the Fraser institute managed to pass Introductory Accounting class – you know the “matching principle”.
This is even more hipocritical since Fraser recently released a “study” to refute that the “rich are getting richer / poor are getting poorer”. They used figures from stats can and said:
“Statistics Canada finds that between 1980 and 2005, median earnings among the top 20 per cent of earners increased by 16.4 per cent while the median earnings among those in the bottom 20 per cent decreased by 20.6 per cent. In dollar terms, the median income among the bottom 20 per cent was $19,367 (in today’s dollars) in 1980 and a mere $15,375 in 2005. In other words, the median “incomes” of the bottom 20 per cent decreased by almost $4,000.
But before we hit the streets in protest, a closer look is warranted.
First, Statistics Canada only examines “earnings” or employment income. That is, they do not consider all other forms of income including retirement income, investment income, and government transfer payments.
Naturally, individuals and families in the bottom income group receive significantly more of their total income from government transfer payments than middle or upper income groups. These transfers include Old Age Security (OAS) pensions, employment insurance, child benefits, and GST tax credits. In fact, more than one-half ($52) out of every $100 received by families in the lowest income group comes from government sources. Clearly, the Statistics Canada measure has the potential for grossly understating real income at the bottom end.
When we examine income inequality using total income, the conclusion that the poor are getting poorer is simply false…..” Niels Veldhuis and Milagros Palacios are economists with the Fraser Institute.
So when it suits them they use “total income” but when they calculate “tax-freedom day” they conveniently omit all sorts of things in order to fudge their numbers.
Normally I just call BS on “tax freedom day” but this year I’m calling BS and Hipocrisy.
I will try and find a link for the quote above, I read it in the newspaper a few weeks ago (I just cut and pasted the text from a newspaper website and emailed it to myself. But I think it appeared in papers all across Canada)
Yep, before the “Great War”, now referred to as World War 1, there was no personal income tax! It was instituted as a temporary measure to fund the war effort. That seems appropriate since our military is still fighting using hardware made in 1914… Hahahahaha!!! Just kidding.
Seriously, though. Governments, like some people, get addicted to money. The more they make, the more they spend. And the government always thinks that they can spend your money better than you the taxpayer can… After all, they can stuff all of our taxpayer dollars into the politicians pockets as well as payolas to politically connected businesses… In that way, it gets better circulation worldwide – after all, who else will send all of those countless billions into unidentified Swiss bank accounts?
Yes, I too hate things like roads, hospitals, defence, etc. What a complete waste of money. I’d much rather people spent their money on play stations, SUVs, and dinners at the Olive Garden.
found it:
http://www.fraserinstitute.org/commerce.web/article_details.aspx?pubID=5328
where do they get their 90K avg salary from? I don’t know many 2 family households making that much unless they live in metropolitan areas like vancouver or toronto. Our household is certainly middle class and not poor at about 70K per annum.
For those of us on salaries, the income tax burden may not seem so onerous if you simply think in terms of your net income and forget your gross salary. I don’t even know what my gross salary is, because I calculate my income for the year by taking my net paycheck and multiplying it by 26 (I get paid every two weeks). It’s not like any of that money was “mine” to begin with; it gets sent straight to the government without my seeing it.
However, I do think it’s strange that governments tax income. In a better world, governments would tax only the things they want to discourage or moderate, such as pollution, resource extraction, vices, etc. So for example I would support a revenue-neutral carbon tax, one that added to the tax on gasoline and other fossil fuels but reduced income tax (with higher reductions to people in lower income brackets in order to avoid being regressive).
Brad, you are either surreptitiously promoting for the Green Party, or, have yet to read into their financial platform.
Hahah, no I’m not a fan of the Green Party! The idea of a revenue-neutral carbon tax has been around since the early 1990s (possibly earlier), and has been proposed many times in Europe; I think even a few countries in Europe have such taxes in place for a while.
Ghostryder: You do have a point about the CPP but I think EI is a tax by any other name. Until the recent budget when the government promised to look into it, EI premiums were paid into general government revenues. How is that not a tax?
Phil: Jon Chevreau makes the point in his blog post as well. Government spending somehow expands to accommodate all incoming revenues.
Pocaterra: Yes, we all have to pay for schools, hospitals, roads, defense etc. But we are also paying for things such as using government resources for party business reported in The Star today.
http://www.thestar.com/News/Canada/article/443950
peter: The Fraser Institute didn’t use the common definition of an “average” family i.e. the median family by income. Instead, they used the average, which is higher than median.
brad: What bugs me most is not so much how much income tax we pay — it is right there in the pay cheque and we know what is (or can easily look it up) — but how many taxes are effectively hidden.
As an aside, I do think a carbon tax is a good idea. But I don’t buy that any government can introduce a “revenue-neutral” tax — it’s an easy bet that we’ll end up paying more.
Brad, I don’t want to get off on a tangent here, but a carbon tax does NOT tax things you don’t want. I mean . . . unless you don’t want food and heat; I do. It is in no way, shape, or form, a ’sin tax’.
Traciatim, a carbon tax simply provides a price signal that forces manufacturers and end users to 1) use energy more efficiently and 2) switch to less carbon-intensive sources of energy. The trick is to do it without causing major economic disruption; in other words it needs to be phased in over years or even decades.
It is not a tax on food and heat; it is a tax on the fuels that we currently use to provide those services. It’s those fuels that are the “sin.” With a carbon tax you end up with the same (or better) goods and services you have today, it’s simply the method of producing them that changes. Do you notice any difference if the electricity that runs your light bulbs comes from a coal plant or a hydroelectric plant?
It can be twisted any which way depending on how you look at the numbers I suppose. Since energy and food are the two highest sources of Greenhouse Gas Emissions this tax is essentially a Heat and Food tax. Sure, farmers could use mules instead of tractors, and reduce their output as well as their GGE by a huge margin . . . then we won’t have enough food. That’s a great plan.
Canada’s Greenhouse Gas Emissions are around 2% of the world total, the human total emissions of all green house gases are around 0.28% of all greenhouse gas emissions. This makes the Canadian amount of total GGE around 0.0056% of the total. Another interesting climate change fact is that even though the amount of CO2 in the air has been increasing at an ever accelerating rate the average world temperature since the 1998 spike has been going down.
http://www.woodfortrees.org/plot/hadcrut3vgl/from:1998/mean:2/plot/esrl-co2/from:1998/normalise
Solar, Wind, and Hydro all are great ways to get power. The trouble is they are more expensive to produce. Until we have an alternative in place and a choice can easily be made we should not be taxing the choice deemed bad by politicians.
I also want to point out, on the topic of taxes, that introducing a new consumption tax one everything will cause the CPI to spike next year. Already the Bank of Canada are preparing for the coming trouble with spiking inflation numbers. If this happens then the Bank of Canada’s only response will be to make interest rates rise to compensate. This will mean people that are gambling their homes on variable mortgages will be hit very hard if this plan goes through. Rising interest rates will be followed by rising unemployment. This is something that is already a concern even without the extra tax.
I don’t consume anywhere near as much as I used to, and I want an income tax cut just as much as the next person. In other places with carbon taxes and high gas taxes we are seeing blockades and rioting . . . seems to be working fine . . .
Taxes are really a question of cost/benefit to me. If we paid high taxes, relatively speaking, and got gold plated services from the government in return, there is not much to complain about. You get what you pay for.
But, if you pay high taxes, and do not get a corresponding benefit, then I get mad which is the situation we have now.
You also hit upon another point- governments are lowering taxes by shifting responsibilities to other levels of government. It is easy to say you reduce taxes by downloading responsibilities to municipalities which don’t have the tax base or the means to handle the burden (the old Mike Harris trick). Or, on the federal level, simply goose the equalization payment formula so you only pay provinces where you want to buy votes (first perfected by the Liberals with the same play-book stolen by the Conservatives).
Then politicians beat their chest and call themselves a tax-fighter? More like a dodger of responsibility and accounting slight of hand.
It makes no sense to me to say we are better off now that tax freedom day is earlier in the year if the means in which we accomplish it is decaying infrastructure, poor schools and a declining quality of life.
Sorry all, don’t mean to prolong this off-topic debate, but…
Traciatim, energy efficiency is about doing the same work for less energy. It’s different from energy conservation, which is simply doing without. Energy conservation = sitting in the dark and shivering. Energy efficiency = sitting in a warm, well-lit house while paying less for heating than you used to.
As for your second paragraph, it’s true that Canada accounts for a relatively small portion of global emissions, thanks to our small population. But to use the same argument, I account for 1/32,000,000 of Canada’s population so does that mean I shouldn’t vote? How could I possibly make a difference?
Most of the rest of your second paragraph is based on misinformation. The natural carbon cycle is in balance with itself and is not causing the global warming problem. We are causing it by introducing carbon that has been stored underground, out of the natural system, for millions of years and putting it back into the system faster than it can absorb it. There is no doubt, even among climate change skeptics, that the increase in CO2 concentrations over the past century was caused by humans. Furthermore, the average world temperature continues to climb:
http://www.ncdc.noaa.gov/oa/climate/research/2007/perspectives.html
In your third paragraph, note that wind energy is now very cost-competitive with other forms of electricity production. Texas is the North American leader in building wind power plants, and they’re popping up all over the state, largely for economic rather than environmental reasons.
Brad, funny you should bring up the voting analogy. I’ve never voted before, but am considering voting against anyone with a carbon tax plan in the next election since I feel it will ruin our economy with very little benefit.
Paragraph two is accurate data, the data can be read here:
http://www.geocraft.com/WVFossils/greenhouse_data.html
Also, the natural carbon cycle isn’t in balance, it flies wildly all over the place through the course of billions of years. The point is that we are an insignificant blip on the radar in the earths history, and future. To think otherwise is simply delusions of grandeur.
Here is another point. If you look at the graph even in the Goracle’s movie where they show the spikes of temperature found:
http://www.paulmacrae.com/wp-content/uploads/2008/06/another-450ty-graph.gif
I’d like you to notice one big fact. It gets warm for a very short period of time, then INCREDIBLY cold for a LONG LONG time, then warm for a spec in the bucket of time, then REALLY REALLY COLD, then warm for a spec….
You’ll notice how ours is the only one that stays around for a while. Could it be that we are narrowly avoiding the next ice age? How do we know for sure? We don’t. That’s the problem.
Another point, the amount of Biomass being produced by the earth is increasing with CO2 and warmer weather thought to be the cause. Historically warmer periods are great periods and cooler ones bring despair.
http://wattsupwiththat.wordpress.com/2008/06/08/surprise-earths-biosphere-is-booming-co2-the-cause/
Oh, and one last point . . . I know, I go on and on. It seems by a poll done that the more you know about global warming, the less you care.
http://www.sciencedaily.com/releases/2008/03/080327172038.htm
I wonder if that’s because once you actually get all the facts in line, the more you realize we have no clue what’s happening.
As a point of reference, keep in mind that Corporate Tax Freedom Day was in late January. Back in the 1950’s, corporations paid about as much tax as individuals… boy, have times changed.
Regarding federal taxes, I think we need to include the fact that the government has been collecting more money than they have been spending (surpluses). You can argue the benefit of this, but if we are talking taxes and comparing with our other friends in the G8 (mostly the US), you have to consider that a lot of other countries are running huge deficits, which is not sustainable.
Overall I don’t think we are overtaxed for the society that we live in. I would like to see more consumption tax instead of income tax, but its hard to teach economics to a basic voter.
Hey Warren, I’m with you on consumption over income tax. If we simply changed the GST to something like 60% and removed the income tax all together I would be more than happy since the GST doesn’t tax needed food. the Fair Tax movement in the US I think has the right idea. Modified properly for our own use would be fantastic in my book, if someone ran on that platform they would have y vote for sure.
I’d agree with taxing consumption as well. In fact, I’d settle for a 20% tax on consumption and a commensurate reduction in income taxes. I’ll also admit that I’m motivated by self-interest here because as a saver we’ll save money under that tax regime
“Yes, I too hate things like roads, hospitals, defence, etc. What a complete waste of money.”
And furthermore, those are things we would be paying for anyway, and likely at a higher rate. The US spends more per capita on health care than any other country without a corresponding advantage in quality of care. Toll roads cost more than regular roads because of the overhead of collecting tolls.
I’m all for making government more efficient and fighting corruption but the blanket “taxes are bad, m’kay” stance is far too simplistic.
“Yes, I too hate things like roads, hospitals, defence, etc. What a complete waste of money.”
For the amount of money we pay, the pot holes should be filled with gold, there should be no waiting in any hospital and our military should be in much better condition.
You can be happy to pay 45% of your income in taxes, but you’re being ripped off.
It’s disingenuous to say that Canada ‘only’ produces 2% of the world’s greenhouse gases.
There are approximately 195 countries in the world. What maximum percentage of total emissions do you think any one country can produce ?
I hate paying taxes as much as the next guy. However, when you look at published lists of all the best countries in the world to live, they all seem to have higher tax rates.
You hear a lot about government waste and mis-management, but even if you could eliminate this, how much would it really impact our overall taxation ?
$ is right on the money! Ha! I KILL me! Anyways, the truth of the matter is that governments almost always make bad choices when it comes to project spending. Look at all of these subsidies to GM and Ford, meanwhile leaving Toyota and Honda in the lurch. What has that investment done for us now? Wouldn’t it have been better to just cut taxes for ALL corporations, not favouring one company or sector over another with subsidies? The government itself isn’t efficient – the Senate and the Governor General’s office consume tens if not hundreds of millions of dollars of tax money each year for just giving cushy jobs to politically connected public servants playing partisan politics and throwing incredibly lavish parties that the Canadian taxpayer cannot afford. And that’s all of the “legitimate” deals. How about things like the sponsorships of politically connected lawyers for getting millions of dollars for rendering no service? How about investing millions into some golf course in Shawinigan? How about giving hundreds of thousands of dollars to a Nazi skinhead white supremacist group?
No thanks, our government has way too much of our money and throws way too much of it away. Oh sorry, it’s not throwing it away, it’s stuffing it into their own pockets. My mistake.
Tim: Actually you are correct, I only have the number for CO2 emissions from 2004, and not all greenhouse gases, and that number is 2.3% for Canada. 22.2% for the USA and 18.4% for China for your other question.
As I understand it, China has now surpassed the USA, and the USA has not decreased since 2004, making their relative percentages more now than in 2004. So, I would think we are near 2%. Granted our per capita rate is high, but we also heat our homes much more than most countries. If we could slow our meat consumption we would get much farther ahead. If we could make people realize that in the winter you need a sweater, even inside, instead of heating to 21C we would do very well too.
The best countries by what measure? GDP per capita? Under age 5 death rates per 1000 people? Amount of people who freeze to death due to crazy winters? Though I agree, more people declare themselves happier from countries with higher taxes and more services that take care of them. You also have to have a balance between government control, public service, private enterprise, taxes, etc. I believe we are near a good balance with Canada and that’s why lots of people like to live here even though we have terrible weather.
I sure hope, for everyones sake, the studies I’ve been reading on the estimated solar output over the next 30 years are not correct, or Canada will not be doing well soon. If these studies do turn out to be fact, you may want to look at buying land in Panama.
“Ghostryder: You do have a point about the CPP but I think EI is a tax by any other name. Until the recent budget when the government promised to look into it, EI premiums were paid into general government revenues. How is that not a tax?”
We can argue whether EI is a tax or not, that was not my point. The point was that Fraser includes EI “tax” as an expense but doesn’t include the income people receive in their definition of income. When they are calculating % taxes they inflate their numbers by including EI as a “tax” in the numerator, but don’t include EI benefits in the denominator.
Not only is this downright dishonest, they do include all available social benefits when they “prove” that poor people are richer today than in years past. Hence the addition of hypocrisy to my list of criticisms.
“but don’t include EI benefits in the denominator. ”
What EI benefits? Make me laugh.
from the Fraser Institute:
Q: What types of income do I include?
A: Pre-tax income from: employment (wages and salaries), farming, self-employment, interest, dividends, private pensions (a company or civil service pension for example), government pensions (CPP or QPP), old age pension (OAS and GIS), and other government transfers (welfare and EI payments for example).
Are there any Capitalists on this site at all?
It appears that Fraser is now including EI, but still uses “cash income” as the denominator when calculating TFD. Their definition of “cash income” EXCLUDES CPP, GIS, GST rebate, INTEREST (bank account & bond), DIVIDENDS, and CAPITAL GAINS.
I recall reading an interesting criticism of Fraser’s TFD that compared TFD as calculated by the Tax Foundation in the US. If the US calculation was used by Fraser TFD would come 3-4 weeks earlier.
Also things that improve a family’s economic status but are not paid in cash are excluded from “cash income” so things like employer pension/RRSP contributions, employer paid health benefits, etc are not included. Fraser knows that if they were to use “total income” that TFD would occur in late APRIL. In fact they know this and conceal this in their press releases, but if you read their publication “Tax Facts” that details much of the calculations behind TFD they admit that
“If we told people that taxes are
31% of their total income before tax, they would
have a large task ahead of them to estimate all
the types of income that must be included to arrive
at this measure of income…Cash income is a
useful tool in describing the tax burden because
it does not force people to go through arithmetic
gymnastics to arrive at their total income before
tax to get an idea of how large the total tax burden
is.” (pp. 37-38)”
I’m sorry here is a more up to date quote from the newer “Tax Facts 14″
http://www.fraserinstitute.org/commerce.web/publication_details.aspx?pubID=3133
“If we told people that taxes are 30% of their total income
before tax, they would have a large task ahead of them to estimate all the types of income that must be included to arrive at this measure of income. Many people think of cash income (wages and salaries, government transfers, pension payments, interest and dividends, farm income, and self-employment income) as their total income. Most do not consider
all the other types of income they earn but do not see (including corporate retained earnings, the investment income on their pension plans, and indirect taxes) as part of their total income. For example, if we wereto report that the total tax burden for the average family was 30% most people with a family cash income of $60,000 would estimate their tax
bill at $18,000 when it is actually closer to $28,000. The crucial piece of information is that governments extracted $28,000 from your family; the particular definition of income is secondary.” (p 35-36)
The PARTICULAR DEFINITION OF INCOME IS SECONDARY?????
AKA pick whatever denominator gets us the answer we want in our press release. Because if we used “total income” and TFD landed on April 20th our press release wouldn’t get printed by any newspaper in Canada.
[...] does not provide a reference to the Fraser Institute study, I presume he is referring to the Tax Freedom Day report published last year: In 2008, the average Canadian family earned $90,678 in income and paid a total [...]