Canadians not getting enough value for their tax dollars

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Final week, The Fraser Institute launched its 2024 version of its publication Taxes versus the Necessities of Life: The Canadian Consumer Tax Index, which tracks the total tax bill of the typical Canadian household from 1961 to 2023. It’s a captivating learn to see how a lot the typical Canadian pays in taxes — not simply income tax, however different taxes like property taxes, GST, carbon taxes and oblique taxes, as nicely.

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Sure, some loud voices on social media — particularly some left-of-centre economists and partisans — scream loudly that this report is flawed. Primarily, from what I can inform, they don’t imagine that oblique taxes — resembling company taxes — must be included within the evaluation (and likewise that they merely don’t just like the Institute for repeatedly calling out fiscal irresponsibility) however I truly assume it’s nicely executed, as a result of any taxes, even these borne not directly, add to an individual’s cost of living. At a minimal, it’s good meals for thought.

Some highlights from the report:

• “In 2023, the typical Canadian household earned an earnings of $109,235 and paid in complete taxes equalling $46,988”
• “In different phrases, the typical Canadian household spent 43.0 per cent of its earnings on taxes in comparison with 35.6 per cent on fundamental requirements.”
• “It is a dramatic shift since 1961 when the typical Canadian household spent a lot much less of its earnings on taxes (33.5 per cent) than the essential requirements (56.5 per cent). Taxes have grown way more quickly than another single expenditure for the typical Canadian household.”
• “Since 1961, the typical Canadian household’s complete tax invoice has elevated nominally by 2,705 per cent, dwarfing will increase in annual housing prices (2,006 per cent), clothes (478 per cent) and meals (901 per cent).” 

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Take in these statistics for even 30 seconds. The truth that the typical Canadian household now pays — and has for some time — extra in taxes than the requirements of life is mind-boggling. After I communicate on this topic at lectures or conferences, I usually check the viewers to see in the event that they know what the typical Canadian household pays in taxes in comparison with the essential requirements of life. The guesses I get are normally manner off.  When the precise proper reply is given, there are sometimes stunned appears and a few audible gasps.  Nonetheless, when the logic is defined in additional element, the viewers largely understands.

The straightforward reality is that the typical Canadian household has much less disposable earnings of their pockets than ever and elevated total taxes is an enormous cause for this. This leaves much less cash for issues resembling financial savings, leisure, journey and higher residing preparations.

The spillover impact is damaging. For instance, with much less disposable earnings, some could not be capable to buy a house for fairly a while if ever. Whereas the foundation explanation for Canada’s present housing shortage is usually self-inflicted given very poor federal immigration policies (we’re taking in much more immigrants than we’re capable of home), much less disposable earnings for Canadians can also be a contributing issue particularly with elevated costs (since demand exceeds provide).

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In my opinion, coverage makers have to pay shut consideration to research and monitoring like that of the current report. It’s time to return to the Sixties and Nineteen Eighties, when, rightfully, Canadians spent extra on the requirements of life than to assist bloated governments. Nonetheless, it might be a monumental effort to get again to that situation.

It begins with considerably lowered authorities spending. The cuts must be swift, deep and large enough to allow the federal authorities to deliver down private earnings tax charges throughout the board to a extra cheap and aggressive stage. This could all be a part of a major re-think of our present private, enterprise and gross sales tax regimes. And we must be bold in our thinking.

Total, Canadians have to genuinely replicate on whether or not they’re getting good worth for his or her tax {dollars}. Sure, I perceive that taxes are one of many costs we pay for a secure nation that gives important infrastructure and assist for its most susceptible residents. However there are limits. One other current Fraser Institute poll on this subject discovered that 74 per cent of Canadians surveyed really feel that the typical household is being over-taxed by federal, provincial and native governments. I concur.

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For instance, the population of the federal public service in 2015 was 257,034 individuals. As of March 31, 2024, it has grown to 367,772. That’s a rise of 110,738 or 43.1 per cent in 9 years, far above the 15.2 per cent improve within the total inhabitants of Canada throughout that point interval. That’s unbelievable.

Taking this evaluation a bit additional, the Canada Revenue Agency’s headcount throughout 2015 was 40,059 individuals. For 2024, it’s 59,155 or a 47.6 per cent improve.

The CRA has an important job to do in administrating Canada’s tax laws. Nonetheless, have Canadians obtained good worth for such a dramatic improve within the CRA headcount? My opinion is an emphatic “no.” I say this due to my experiences of lengthy phone wait occasions to debate routine issues, quite a few and prolonged delays in processing objections, delays within the processing of routine credit resembling international tax credit, audits for issues which can be wholly ridiculous, together with the irritating incompetence of many new hires.

Former United States President Ronald Reagan as soon as famously mentioned: “The federal government’s view of the financial system may be summed up in just a few brief phrases.  If it strikes, tax it. If it retains transferring, regulate it.  And if it stops transferring it, subsidize it.”

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There’s quite a lot of knowledge in that quote.

Canada, it’s nicely previous time to demand extra worth for our taxation {dollars}.

Kim Moody, FCPA, FCA, TEP, is the founding father of Moodys Tax/Moodys Personal Consumer, a former chair of the Canadian Tax Basis, former chair of the Society of Property Practitioners (Canada) and has held many different management positions within the Canadian tax group. He may be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.

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