Canadians Spend Nearly Half of Their Income On Taxes, Reports Fraser Institute

A recent analysis by the Fraser Institute, a conservative think tank, has uncovered a striking statistic: in 2023, the average Canadian household devoted a staggering 43 percent of its income to taxes.

Wendy Brookhouse, a financial planner and CEO of Black Star Wealth, expressed her astonishment at the study’s findings. “It was so surprising to me the results of that study because so many of those taxes were hidden,” Brookhouse remarked. “You don’t even realize they’re adding up.”

The Fraser Institute’s study shows that the average household’s income was approximately $109,235 last year, with $46,988 going towards taxes. This is a sharp contrast to the year 2000, when households earned around $54,488 and spent $25,259 on taxes. The study traced historical data back to 1961, revealing that average income was then $5,000 with a tax expenditure of $1,675, which was about a third of earnings.

Jake Fuss, the director of fiscal studies at Fraser Institute, elaborated on the tax burden: “It’s not only income taxes. It’s also payroll taxes, sales taxes, fuel taxes when you’re filling up at the pump. Property taxes as well.”

Remarkably, last year’s tax expenditure surpassed what Canadians spent on housing, food, and clothing combined. Specifically, average spending on shelter was $23,809, food costs amounted to $12,607, and clothing expenses totaled $2,514.

Jay Goldberg, interim Atlantic director for the Canadian Taxpayers Federation, highlighted the broader financial strain: “Lives for Canadians right now are so unaffordable. We have statistics that have come out quite recently saying that 50 percent of Canadians are $200 away from not being able to pay their bills and this is a big reason why.”

The study further revealed that since 1961, the total tax burden for families has surged by 2,705 percent. In comparison, housing costs have risen by 2,006 percent, while food expenses have grown by 901 percent.

Goldberg advocates for a reassessment of tax policies at all levels of government to alleviate this burden. Until such changes occur, Brookhouse advises individuals to maximize their credits and deductions and consider contributing to an RRSP, even if it’s a small amount. “Is it worth it having that Starbucks coffee versus putting $5 into my RRSP? These are the kinds of decisions that you have control over that you can start to take control of the numbers in your life because you can’t control the taxes,” Brookhouse said.

Additionally, the study noted that people spent an average of $23,317 on other necessities, such as communications, child-care, pet care, transportation, health care, recreation, education, tobacco products, and alcoholic beverages.