The average Canadian family spends more on taxes than on food, shelter and clothing combined,a new study released today by the Fraser Institute, a Canadian public policy think-tank that focuses on free markets and government policies targeting consumers. 

"If you asked people to name their household's biggest expense, many would likely say housing, but in reality, the average Canadian family spends more on taxes than all basic necessities including housing," the report's author Charles Lammam said of the paper, which tracks the total tax bill of the average Canadian family from 1961 to 2013.

In 2013, the study says the average Canadian family earned $77,381 and paid $32,369 in total taxes (or 41.8 per cent of income) compared to 36.1 per cent for food, shelter and clothing combined, the paper found.

By comparison, in 1961, the average family earned approximately $5,000 and spent much more of its income on food, shelter and clothing (56.5 per cent), while $1,675 went to taxes (33.5 per cent). 

Expenses for average Canadian family: Fraser Institute

Over the past five decades, total expenditures on taxes have grown faster than shelter, food and clothing. (Fraser Institute)

But not everyone agrees with the Fraser Institute’s analysis. "Those numbers are not directly comparable," said Peter Dungan, an economist at the Rotman School of Management. "First, in 1961 we did not have medicare," he said. The report's starting year baseline begins in 1961, the first year that the federal government started paying for a national health-care plan, first known as medicare and later brought under the umbrella of the Canada Health Act.

Moving the onus of health-care spending from individuals onto the state has put a major cost on the backs of taxpayers along the way, which may be showing up in the Fraser Institute's report. According to recent numbers by consultancy Mercer, health-care spending was less than $100 per person in the early 1960s, 57 per cent of which was covered by government. But by 2010, per capita health spending had jumped to $5,614, of which 70 per cent was paid for by Ottawa.

Other big ticket items such as the Canada Pension Plan and Old Age Security didn't even exist in 1961.

Dungan points to higher education as another factor that needs to be taken into consideration.  "At that point, many Canadians did not even finish high school, let alone go to university or college.… Part of what’s included in the increase in taxes, is an increase in educational taxes."

Other criticisms

Canada’s booming oil and gas industry over the past 50 years is also a factor. "Included in those government revenues are royalties on oil and gas, which were not nearly as high then," said Dungan. He added that in addition to taking inflation into consideration, analysts must also consider the relative price of oil and gas as well as the sheer amount that Canada exports today. "The Fraser Institute counts those as taxes."

Dungan adds that we should also take into consideration that, relatively speaking, food has become less expensive, and many consumer goods are less-expensive imports.

"The report is very misleading," said Iglika Ivanova, economist at the Canadian Centre for Policy Alternatives. "It grossly overestimates the tax bill of the average Canadian family because of their methodology. They include things such as business taxes and import duties in the bill of the average family.

"There is lots of research, mainly from the US, that business tax is largely paid by shareholders, little is paid by workers … the average Canadian family is not a large shareholder," said Ivanova.

Lammam says it is fair to include business taxes because those taxes trickle down to Canadian families in the form of reduced wages, higher prices and lower investment returns.

"Corporations are pieces of paper, but it's regular people that pay these taxes," he said in an interview with the CBC on Tuesday.

The Fraser Institute's measure of an "average Canadian" is also flawed, says Ivanova. "We need to look at the distributional issues as to who is paying for what. Averages are becoming less and less meaningful. What does it mean when you have such large disparity? … We’ve eroded tax fairness. This is a much bigger concern for me versus the size of the tax bill." 

Rising tax burden

All in all, the report's total tax bill represents both visible and hidden taxes paid to the federal, provincial and local governments. This includes income taxes, payroll taxes, health taxes, sales taxes, property taxes, fuel taxes, vehicle taxes, import taxes, alcohol and tobacco taxes, and more.

Since 1961, the average Canadian family's total tax bill has increased by 1,832 per cent, dwarfing increases in shelter costs (1,375 per cent), clothing (620 per cent) and food (546 per cent).

"Over the past five decades, the total tax bill grew much faster than the cost of basic necessities, so now taxes eat up more income than any other single family expense. With more money going to the government, families have less to spend on things they care about, to save for education and retirement, and to pay down household debt," Lammam said.

Even after accounting for changes in overall prices (inflation) over the period, the tax bill shot up 147 per cent.

"While there's no doubt that taxes help fund important government services, the real issue is the amount of taxes that governments take compared to what we get in return. With almost 42 per cent of income going to taxes, Canadians should ask whether they get the best value for their tax dollars."

The Institute has also produced a short, animated video that graphically shows how the average family's tax bill has changed.

With files from The Canadian Press