As the old saying goes, there are only two certainties in life: death and taxes.
Everyone is aware of that big chunk of money that comes off their paycheque, and everyone knows that you pay more than the sticker price when you’re shopping, once taxes are added.
… have you ever wondered how much you actually pay in taxes each year?
While tax returns help us understand how much income tax we pay, it’s difficult for most Canadians to calculate their total tax bill.
In Canada we pay many different taxes to the federal, provincial and local governments. Some of these taxes are visible – but many are hidden, which adds to the confusion about how much we actually pay.
Not only do we pay income taxes, we also pay property taxes, payroll taxes such as the Canada Pension Plan, health taxes, sales taxes such as the GST, carbon taxes, taxes on gasoline, taxes on imported goods, “sin” taxes and so on.
Understanding your family’s total tax burden is important to assess the value you receive from government services and income transfers. It’s ultimately up to Canadians to decide if they receive good value for these services.
In 2021, we estimate the average Canadian family (consisting of two or more people) earning $124,269 will pay $48,757 in total taxes — or 39.1% of their income.
In other words, if you paid all your taxes for 2021 up front, you’d give some level of government every dollar you earned before May 24 — Tax Freedom Day. After working the first 143 days of the year for government, you’re now working for yourself and your family.
But Canadians also need to understand the tax implications of the $234 billion deficits our federal and provincial governments are running this year. In short, we’re spending more today than we’re raising in taxes, and the difference between the taxes collected and what we’re spending are simply taxes deferred into the future.
To see how these deficits impact Tax Freedom Day, we calculated what it would be if the government paid for all its spending today with taxes collected today — we call that the Balanced Budget Tax Freedom Day.
And in 2021, the Balanced Budget Tax Freedom Day won’t arrive until July 7 – another 44 days from now.