June 18 is the day Quebec families have made enough money to pay off the total tax bill levied by all levels of government, according to the Fraser Institute's annual calculations.
Referring to the day as Tax Freedom Day, the institute says this day comes two days later this year in most jurisdictions. If Canadians had to pay all taxes upfront, they would give governments each and every dollar they earned prior to Tax Freedom Day, according to the independent research and educational organization.
“Canadians are waiting an extra two days to celebrate Tax Freedom Day partly because governments across the country continue to increase taxes in an effort to make up for their overspending and deficits,” said Charles Lammam, Fraser Institute associate director of tax and budget policy and co-author of Canadians Celebrate Tax Freedom Day. “What’s worse, some governments are relying on the most damaging types of tax increases including higher tax rates on personal income and investment, which will ultimately discourage economic growth.”
Among the tax increases announced so far are hikes to British Columbia’s corporate income tax and top personal tax rate as well as its Medical Services Plan premiums; a new top income tax bracket in Quebec; increases to Manitoba’s Provincial Sales Tax and financial corporate capital tax; increases to New Brunswick’s corporate income tax and all four personal income tax rates; increased taxes on small businesses in Prince Edward Island; cancellation of a corporate tax decrease in Saskatchewan; and increased Employment Insurance premiums federally.
Tax Freedom Day also comes later this year because Canada’s progressive tax system imposes a higher tax burden on families as their incomes increase.
Balanced budget Tax Freedom Day
The report notes that Tax Freedom Day would arrive nine days later this year (on June 19) if the federal and provincial governments attempted to balance their budgets with additional tax increases.
“This year’s deficits are not trivial. Canadian governments expect deficits to total $34 billion, with $18.7 billion coming from the federal government and $15.3 billion from the provinces. Since today’s deficits must one day be paid for by taxes, Tax Freedom Day may come later in the future,” Lammam said. “Of particular concern is Ontario, Canada’s largest province, with a deficit of $11.7 billion forecast this year. Tax Freedom Day would fall an astounding 14 days later on June 23 if the Ontario government raised taxes to cover its current deficit spending.”
Total tax bill
In 2013, the average Canadian family (consisting of two or more people) will earn $97,254 in income and pay a total of $42,400 in taxes (43.6 per cent of income). The taxes used to compute Tax Freedom Day include income taxes, payroll taxes (social security, pension, and health taxes), property taxes, sales taxes, profit taxes, import duties, fuel taxes, license fees, taxes on alcohol and tobacco, natural resource fees, and a host of other levies.
The report estimates the average family’s income will increase 2.3 per cent in 2013, while the total tax bill increases by much more (3.2 per cent). The largest tax increase for 2013 comes in the form of payroll taxes (including social security, pension, and health taxes) — up $483 for the average Canadian family. Other notable increases include those to income taxes ($455), sales taxes ($167), and property taxes ($83).
Canadians can calculate their personal Tax Freedom Day using the Fraser Institute’sonline calculator.
Tax Freedom Day among the provinces
Tax Freedom Day varies from province to province, depending on the taxation levels of provincial and local governments. From earliest to latest:
• Alberta (May 19)
• B.C. and P.E.I. (June 4)
• Manitoba and New Brunswick (June 6)
• Ontario (June 9)
• Nova Scotia (June 10)
• Saskatchewan (June 11)
• Quebec (June 18)
• Newfoundland and Labrador (June 22)
Compared to last year, Tax Freedom Day comes later in all provinces but Alberta and Newfoundland and Labrador. Manitoba has the longest delay, with Tax Freedom Day arriving four days later in 2013, driven in part by its looming PST hike.
To calculate average family income, the report considers not just wages and salaries, but also interest, dividends, private and government pension payments, and other transfers from governments.
Tax Freedom Day calculations are based on forecasts of personal income and federal and provincial budget tax revenue. When final revenue numbers become available at the end of each fiscal year and personal income data are updated by Statistics Canada, the Fraser Institute revises its Tax Freedom Day calculations for previous years.