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moneysense.ca, 19/06/07
Tax Freedom Day
The Fraser Institute estimates that tax freedom day falls on June 20th this year. The institute defines tax freedom day as:
the day in the year the average Canadian family has earned enough money to pay the taxes imposed on it by the three levels of government: federal, provincial and local.
It is easy to accuse the institute of right-wing bias but the truth remains that we are highly taxed. Worse, as the report points out, a number of taxes (such as the employer’s share of CPP contributions and EI premiums) are effectively hidden but ultimately borne by us.
The critics of the report point out that the institute overstates the income of an average family. For instance, Statistics Canada’s data show that a median two person Canadian family earned an income of $57,700 (in 2005). The Fraser Institute’s estimate for cash income for an “average family” is significantly higher at $83,775. Still, the report is a timely reminder of how much tax we pay.
moneysense.ca, 19/06/07
That is interesting, I’ve always wondered what they meant by “tax freedom day”. I thought it was a day where everything was tax free.
Isn’t this early then last year? What’s the trend been like for the past decade? Just curious – thanks.
The report says “Tax Freedom Day is the day in the year the average Canadian family has earned enough money to pay the taxes imposed on it by the three levels of government: federal, provincial, and local.”
Also “Tax Freedom Day in 2007 arrives four days earlier than in 2006, when it fell on June 24.”
Sol: The 2007 date is an estimate and the final date could be off by a few days. For example, in 2006 they estimated it as June 19th and revised it to June 24th. In 2005, the estimate was June 25th and revised to June 24th.
So, yes the estimate is earlier than last year’s actual number. The latest it has been is June 25th in 2000.
I don’t know about you but I work the first half of the year for myself and then, I worry about the government’s share
Lies, damned lies and statistics….
As is often the case this is a “true” but totally misleading “fact”. They work out how long it takes to pay the tax but totally ignore the value of the benefits received. eg. education, security, healthcare. etc.
It’s actually the rich, singles and DINKs that generally pay more in tax than they receive back in benefits. It doesn’t matter at all if the amount of tax you pay is 1%, 20% or 70% of your income – if you get more back in benefits you’ll be happier than if you are paying more in tax than the benefits you are receiving in return. That’s why families in highly tax scandinavian countries are probably a LOT happier than families in most african countries, even if the african families are paying 0% tax!
Regards
http://enoughwealth.com
They actually point out in the report that voters have to decide for themselves how much benefit they receive from their tax dollars. I don’t know about Australia but here in Canada, the federal government keeps running up huge surpluses (which are extra taxes out of our pockets). You know what happens when a government has extra dollars? They find a way to spend it all on pork barrel spending.
We all accept that taxes are price to pay to live in a somewhat equitable society. But why is it wrong to say taxes are too high when you see much of it spent on waste and mismanagement?
CC, I just want to disagree with your statement:
“I don’t know about Australia but here in Canada, the federal government keeps running up huge surpluses (which are extra taxes out of our pockets)”
As long as we have a national debt, then the surpluses aren’t extra taxes. I agree with you that governments are deciding on new spending (the “Conservatives” being worse than Imelda Marcos at a shoe sale) but while the liberals were putting the surpluses against the debt it was creating a virtuous cycle of interest savings leading to more surpluses leading to more debt reduction.
(PS: I agree 100% on calling them out on waste, however!)
Steve: True, the federal government does use the unexpected surplus to pay down the debt. For example, let’s say 2005-06 had an unexpected surplus of $5B (I’m making this number up). The exact figure is known only when the financial year is over. In 2006-07, the $5B from the previous year is used to pay down the debt. But, the spending for 2006-07 is increased by $5B by factoring in the previous year’s surplus in the current year’s revenues. If there is a surplus in 06-07, it results in more spending in the next year and so on…
BTW, it doesn’t matter whether the government is red or blue. Their main aim is to get elected or re-elected and spending money to influence voters comes naturally to politicians.
Enough Wealth: Today’s Financial Post has an article on Tax Freedom Day in different countries. In Australia it is April 25th, almost two months earlier than Canada. Maybe I won’t complain either if we were in the same position.
“families in highly tax scandinavian countries are probably a LOT happier than families in most african countries, even if the african families are paying 0% tax”
Apparently Scandinavian nations have been reducing taxes and government hand outs since the 1990s, not only due to the unsustainability but also because of the electorate. The whole “scandinavians love taxes” myth always make me laugh. They’re taxes are so high, therefore they must like it. Italians must love debt.
Africans not being as happy as westerners has more to do with the lack of freedoms they have, including the lack of freedom to create and keep wealth. 0% tax on 0 wealth is 0. I’d be happier being taxed 1% on $100, doesn’t mean I love taxes.
I also note that our government hands out tons of services to our native populations for decades, with no obvious improvment in their happiness. It almost appears the opposite.
“but while the liberals were putting the surpluses against the debt it was creating a virtuous cycle of interest savings leading to more surpluses leading to more debt reduction”
Looks like the Conservatives reduced our debt in 2006 by over 13 billion. 2007 budget calls for another 9.2 billion.
Since the time I have been able to vote, governments have started to reduce our federal debt. Thanks baby boomers for leaving me part of your bill.
Enough Wealth: The other problem with factoring the benefits of taxes is who decides on the value of the benefits? If I’m paying the government $5000 for “security” per year, but I value that security as $1000, then I’m *not* getting good value for my spending (someone else might feel that education is a waste of money, and another person may not want money to go toward healthcare if they plan to “live fast, die young and leave a beautiful corpse”). The beauty of the free market is that people can voluntarily spend money on what they value, with taxes the purchase is forced on us (so some people are getting a good deal on benefits they want, while others are getting a bad deal paying for things they don’t want).
As far as I’m concerned, it’s a complete travesty that our tax freedom day occurs when it is already HOT outside. Any year where tax freedom day occurs in the spring means that we pay too much tax.
And who ran up all this national debt? Not my generation. So why does everybody feel like it’s our damn job to pay it off? As far as I’m concerned, we should only pay the interest and let future generations figure it out.
The government can’t be trusted at all with our tax money. We should have a tax revolt and have everybody stop paying taxes until the government can demonstrate that they’re responsible with how they spend our money. Politicians of all stripes abuse the public purse. Every single one of them lie and cheat just to get into office so they can stuff their pockets as well as all of their friends’ pockets with tax dollars. Winning an election is just like hitting the jackpot in the lottery for these people.
And yes, for your information, I’m having a bad day at work.
Phil, you’re in dreamland if you think your generation (and it doesn’t matter which one you’re in) didn’t help build up the national debt. Did you go to school? ever use the healthcare system? drive or ride on a public road lately? Get a speeding ticket? If so then you are making use of infrastructure which that debt helped pay for and maintain. The fact that you weren’t alive or of age when some of these infrastructure decisions were made doesn’t excuse you and your generation from some of those costs.
Mike
The point of Tax Freedom Day is to make people aware of how much we pay, and then allow us to decide if we’re getting value for what we pay. It’s a debate worth having.
Allow me to quote the following column by the Fraser Institute published today in the Toronto Sun:
Of course many Canadians happily pay their taxes to support the numerous government programs they believe are effective. On the other hand, many others are outraged at the level of taxation and the quality of government services they finance.
Therein lies the value of Tax Freedom Day: it gives Canadians the information they need to determine whether they are getting value for the money they send to governments.
While it is ultimately up to individual Canadians to determine if their taxes are too high and whether or not they are getting value for their tax dollars, some perspective might help.
Consider the findings of a 2005 study Public Sector Efficiency: An International Comparison led by economists at the European Central Bank. The study measured the efficiency of the public sectors in 23 countries, including Canada and found that Canada’s public sector was relatively inefficient. Specifically, the authors found that Canada should be able to achieve the same outcomes from government programs while using only 75 per cent of current resources. In other words, there is approximately 25 per cent waste in Canada’s public sector. And it’s not hard to see why.
Our health care system consumes nearly a quarter of total federal, provincial and local tax revenues. Only Iceland spends more than Canada to deliver universal-access health care to their population. Despite that high level of spending, Canadians experience comparatively poor access to technology and doctors, and comparatively long waiting times for surgery. It is quite clear that we are not getting value for money in government health care compared to other countries.
Similar patterns hold for education, social services and a host of other government programs. In most cases, money is not the problem. Through genuine reform, Canada could reduce the amount spent on many of these programs without reducing the benefits to Canadians.
In addition, our tax dollars are often simply wasted – think sponsorship scandal and the fiasco surrounding the firearm registry. Unfortunately, these are not isolated events. Canada’s Auditor General consistently finds case after case of waste, misrepresentation, incompetence, and self-interested public officials. In fact, a recent survey of reports from the Auditor General found 284 cases from 1992 to 2005 where taxpayer’s dollars were either wasted or program objectives not achieved.
Clearly, Canadian governments should be able to enact significant tax relief while achieving the same level of performance from their programs. If federal, provincial, and local taxes were reduced by 25 per cent (the suggested amount of government waste), Tax Freedom Day would arrive roughly a month earlier year. In other words, Canadians would be celebrating Tax Freedom Day in mid-May rather than on June 20th.
Individual Canadians must decide for themselves if, as taxpayers, they are receiving value for their tax dollars. Tax Freedom Day provides Canadians with a comprehensive, graphic measure of an average family’s total tax bill or the cost of their bundle of government services, to allow them the opportunity to do so. Our hope is that such understanding will lead to more pressure for real and meaningful tax relief for Canadians in the future.
Phil, your post got me a little riled up but your disclaimer at the end gave me a good laugh.
Thanks, I was having a bad day as well.
Mike: I agree with you and I read one other instance of Govt. waste in yesterday’s post (I think it was a front-page story). It seems Canada spends $3B annually in foreign aid, $2B of which is sent to countries such as Ireland (higher per-capita income than Canada), China, Brazil, Poland etc. While it would be uncharitable to begrudge aid money sent directly to help pay for drinking water or food or education of desperately poor people, I see no reason why the Irish or the Polish can’t help themselves.
“Our health care system consumes nearly a quarter of total federal, provincial and local tax revenues. Only Iceland spends more than Canada to deliver universal-access health care to their population. Despite that high level of spending, Canadians experience comparatively poor access to technology and doctors, and comparatively long waiting times for surgery. It is quite clear that we are not getting value for money in government health care compared to other countries.”
While it’s probably true our healthcare system needs fixing, the solution isn’t privatization and lower taxes. Americans may pay less tax, but they pay more per capita for healthcare and get less coverage. In fact, there was a recent study showing that even the Americans who can afford to pay receive a lower level of care than in other countries. Money is not the problem, therefor throwing money at it or taking money away will not fix the problem. We need to look at countries with more efficient systems than ours and figure out what we can do better.
I’ve never been too worried about how much I pay in tax, because I know people in the US who earn about what I do, and despite paying less tax they aren’t noticeably better off. They still have to pay for the things that aren’t covered by their taxes.
“I see no reason why the Irish or the Polish can’t help themselves.”
I’d add Quebec to that list, even though we don’t call their handouts foreign aid.
I am also concerned about the amount of taxes we pay and in particular the quality of care we recieve for those taxes.
Many have said the system is underfunded but I’m not convinced the answer is to pour more money into the health care system. Many physicians that I’ve spoken with complain about low salaries and the opportunity for more money in the USA. Simple laws of economics teach us that if we increase the salaries of physicians and health care workers, people who wouldn’t have normally choosen a career in health care would now move in to it. We see this now and its scarey. Many up and coming potential med students are choosing the career for the prestige and the money and not to help humanity.
I think there are 3 major cost centres for health care:
1. wages & salary,
2. technology & infrastructure, and
3. education & training.
I don’t mean to offend any physicians on this forum, but I think the wages & salary are too high – here and in the US.
I propose that we vastly increase the number of seats in medical school and allow those qualified from other countries to practise. The increase in health care workers (supply) will naturally reduce the high cost of salaries and wages paid.
New med students should sign contracts upon admission to work in Canada for at least 10 years after graduation. To graduates from going south there should be penalties. E.g. loss of license to practice in Canada, immediate repayment of student loans, grants and bursaries, repayment of tax credits or even fines.
My 2 cents.
Last line should say: To prevent…
“Many physicians that I’ve spoken with complain about low salaries and the opportunity for more money in the USA.”
This may be one of the reasons our system is in worse shape than other countries. We have an even more expensive system to the south offering even more inflated salaries. It’s a lot easier to move to the US from Canada than from Europe or Asia. I have no idea what the solution is, other than imposing penalties or incentives to keep doctors here. Perhaps make medical school fully paid for if the student graduates and works in Canada. If they move to another country, they have to pay back the entire cost of their education, not just the already subsidized tuition.
“Many physicians that I’ve spoken with complain about low salaries and the opportunity for more money in the USA.”
I live in a border city and have a cousin that is a doctor but is not currently licensed to practice (he earned his degrees from another country so this issue is two-fold). When asked about the move of doctors to the US he told me that, in his research (he currently works in a Canadian hospital while he continues his studies) he said that, though the wages in the US are higher, so too is the malpractice insurance…so much so that it’s almost a wash. He told me this a few years back when the US dollar was worth a lot more so I wonder how true it is that we lose doctors to the US due to wages. This is just one opinion but thought it might be worth mentioning.
Also, I currently work in the US and live in Canada. I can tell you that, as a married person with two equal incomes, no children and a relatively small mortgage (since home mortgage can be written off in the US), the tax rate difference between Canada and the US is not nearly as significant as people think. The tax advantages grow when you add children to the mix as well as high mortgages but in our current situation, there is not real US tax advantage.
For the people who HATE taxed in Canada, you should MIGRATE to HONG KONG. HK has FLAT tax rate, 16%.
HK is a developed metro city, with perfect transit system that you dont even need to drive!!!! And to become a HK citizen is petty simple, you just need to invest 1 million Canadian in HK asset such as stocks or housing etc… and live their for 7 years.
But let me mind you, HK has very poor pollution that you cannot even see the BLUE Sky 95% of the year!!!!! Also, in HK if you dont have money in your pocket people will not treat you like human anymore.
I LOVE Canada because of the FREE healthcare, FREE Education for the children and thee FREE BLUE SKY and FREE (or close to free) camp site, lake, trails, mountains!!!!
I have a 1 year old and I gets $160 from the government every month plus I claim child care expense I actually making money from the benefit!!!!!!
GTA: If all of us migrate to Hong Kong, who is going to pay for your FREE heath care and FREE education?
[...] 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 [...]
The big problem with the tax system in Canada is that you think you have a tax freedom day. Thats what the powers that be would like you to believe, when the fact is you pay taxes on everything you buy. Gas for your car, home heating fuel, electricity, not to mention the sin tax on booze and cigaretts. The list goes on and on and on. People in Canada need to wake up and band together and see if there’s some way of holding governments accountable for thier actions.