Canadians have finally worked enough in 2024 to pay off taxes: Report

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Thursday is Tax Freedom Day this year, signifying the day when Canadians stop working to pay taxes levied on them by all levels of government and start earning money for themselves, according to an annual survey by the fiscally conservative Fraser Institute.

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“If Canadians paid all their taxes up front, they would work the first 164 days of this year before bringing any money home for themselves and their families,” said Jake Fuss, the Fraser Institute’s director of fiscal studies.

“Tax Freedom Day helps put the total tax burden in perspective and helps Canadians understand just how much of their money they pay in taxes every year.”

In order to determine Tax Freedom Day, the study combines all forms of federal, provincial and municipal taxes, fees and levies.

This includes income taxes, payroll taxes, health taxes, sales taxes, property taxes, profit taxes, tobacco and alcohol taxes, amusement and other excise taxes, auto, fuel and motor vehicle licence fees and carbon taxes, import duties, natural resource levies and other charges, not all readily visible to the public.

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The Frasier Institute study finds families, including unattached individuals, with an average cash income of $112,235 this year will pay $48,830 in taxes or 43.5% of their total income.

Families consisting of two or more individuals with an average cash income of $147,570 this year will pay $65,766 in taxes or 44.6% of their total income.

Families consisting of two parents and two children under the age of 18 with an average cash income of $176,266 this year will pay $75,904 in taxes or 43.1% of their total income.

The Fraser Institute study says Tax Freedom Day in 2024 comes one day later than last year and four days later than in 2019, the year before the pandemic hit, because total tax revenues forecast by Canadian governments this year are expected to increase faster than the incomes of Canadians.

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In light of combined federal and provincial government deficits of almost $70 billion this year, the Fraser Institute also calculates a Balanced Budget Tax Freedom Day across Canada — June 23 — if governments were required to cover current expenditures with current taxation.

“Of course, today’s deficits must one day be paid for by taxes,” the study says. “Deficits should therefore be considered as deferred taxation.”

Specific Tax Freedom Days in each province and the total amount each Canadian pays in taxes depend on the levels of provincial and municipal taxation where they live.

According to the study, Tax Freedom Day this year arrived earliest in Manitoba on May 26, while the latest Tax Freedom Day will be in Newfoundland and Labrador on June 30.

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Tax Freedom days in the other provinces, in ascending order, were June 2 in Saskatchewan; June 4 in B.C.; last Saturday in Alberta; and Monday in Ontario. The others will be this Saturday in New Brunswick and P.E.I.; June 22 in Nova Scotia; and June 27 in Quebec.

Canadians can calculate their personal Tax Freedom Day using the Fraser Institute’s Personal Tax Freedom Calculator at www.fraserinstitute.org.

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Federal, provincial and municipal taxes, premiums, fees and levies pay for a wide range of public services from health care, to public education, to social welfare programs, policing, firefighting, road maintenance and more and are also returned to Canadians in the form of entitlement programs, such as employment insurance, the Canada Pension Plan and Old Age Security.

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“Canadians need to decide for themselves whether they are getting their money’s worth when it comes to how governments are spending their tax dollars,” Fuss said.

With 46% of Canadians saying they are living paycheque to paycheque (Leger poll, May 24-26 1,620 adult Canadians) and Canadians paying more in total taxes than they do for housing, food and clothing combined (Fraser Institute report, September 2023, Taxes versus the Necessities of Life), getting good value for the taxes Canadians pay to governments is vitally important.

Finally, it should be noted that calculating the total tax levels Canadians pay has long been a controversial issue and critics of how the Fraser Institute calculates Tax Freedom Day say its numbers are incorrect and misleading.

These criticisms include that the use of average family incomes instead of median incomes inflates the amount of money average families pay in taxes; that it includes taxes paid by businesses as if they were being paid by families; and that it fails to calculate the benefits families receive from paying taxes, such as hospitals, schools and other public infrastructure that they could not otherwise afford.

A more accurate calculation of Tax Freedom Day, they say, would be weeks or months earlier than the Fraser Institute claims.

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