'Tax Freedom Day' comes as Flaherty details budget
On the same day Ottawa lays out how it plans to spend Canadians' money, Canadians finally pay off their taxes for the year and can start working for themselves, a prominent think-tank says.
The Fraser Institute declared Monday to be "Tax Freedom Day," the day Canadians have paid enough of a percentage of their annual income in taxes to all levels to government.
The group announces Tax Freedom Day annually as an easy-to-understand picture of the Canadian tax burden.
"If Canadians had to pay all taxes up front, they would have to pay each and every dollar they earned to governments prior to Tax Freedom Day," the group said in a release.
Essentially, the group determines Tax Freedom Day based on the assumption that Canadians have to pay all of their taxes up front before retaining any income for themselves.
Two days later
This year's date, June 6, falls two days later than it did last year — meaning Canadians' total tax burden has become slightly more onerous.
In 2011, the average Canadian family with two or more individuals will earn $93,831, and pay $39,960 in taxes. That means the average tax bill takes up 42.6 per cent of the family's annual income, the group says. (The calendar year is 42.6 per cent completed on June 6, hence the day being declared Tax Freedom Day.)
Among the many taxes Canadian families pay, incomes taxes increased the most — by $550 — while sales taxes jumped by $335.
"Canadians are taxed by federal, provincial, and local governments in ways that are both obvious, such as income tax, and ways that are hidden, such as alcohol, amusement, and gasoline taxes," the Institute's senior economist Niels Veldhuis said.
The main reason that Tax Freedom Day came two days later in 2011 is because of the rebounding economy, the group said.
With Finance Minister Jim Flaherty poised to reveal Ottawa's spending priorities in the federal budget on Monday at 4 p.m., the group warned that the true Tax Freedom Day would come 16 days later, on June 22, if governments paid for their current levels of spending with additional taxes, instead of running deficits, which many are currently doing.
In the election campaign that led to their majority government in May, the Conservatives pledged to balance the budget by the 2014-15 fiscal year.
"Finance Minister Jim Flaherty … should put forth an aggressive plan that balances the budget within two years through spending cuts," Veldhuis said. "This would provide the fiscal room for a multi-year plan to reduce taxes."
Tax Freedom Day varies from province to province, depending on the taxation levels of provincial and local governments. The Fraser Institute says Alberta has the earliest Tax Freedom Day on May 18, followed by Prince Edward Island on May 27, then New Brunswick on May 31.
Manitoba’s Tax Freedom Day falls on June 1, followed by Ontario (June 4), Saskatchewan and British Columbia (June 6), Nova Scotia (June 7), and Quebec (June 10). Newfoundland and Labrador has the latest Tax Freedom Day, on June 19.