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How heavily taxed are Canadians

“The typical Canadian between 25 and 54 only pays 14% in income taxes.”

One of the most contentious issues between those who consider themselves fiscally conservative, and those who lean left on the economic spectrum, is the extent to which society should be taxed.

The former camp equate low taxes to economic freedom — individuals should be able to choose how they want to spend their hard-earned money instead of having the government make spending decisions on their behalf. The latter group argue that individuals tend to think short-term when it comes to their economic welfare — high taxes will somewhat ensure a long-term social safety net that most people don’t plan for.


Canada, apparently, skews right when it comes to taxation, according to a recent study put out by the left-leaning Broadbent Institute. The report pegs the effective tax rate for an average Canadian family at 24 percent, making us one of the least-taxed societies in the developed world.

“The typical working Canadian individual between 25 and 54 pays a rate of approximately 14 percent in income taxes,” write authors Richard Shillington and Robin Shaban. “Only 20 percent of Canadians pay more than 20 percent of their income as income taxes, and only 2 percent of working Canadians pay more than 30 percent in taxes.”

The Broadbent Institute report sharply contradicts the dominant narrative among politicians and to some extent the media, that Canadians are heavily taxed. In fact, this study was put together for the specific purpose of challenging the notion of Canada as a highly-taxed society, propagated largely by the right-leaning Fraser Institute.

Each June, the Fraser Institute picks a day which they peg as “Tax Freedom Day.” This is a day in the calendar year, according to the Institute, where Canadians “stop working for the government, and start working for themselves.” The British Columbia-based think-tank claims that the average Canadian family pays a tax rate of over 40 percent, implying that it takes almost half a year for Canadians to reach a point where their salary finally goes towards their own expenses, and not the government.


So what’s what? Are we Canadians overtaxed, or undertaxed?

Canadians are taxed under a marginal tax rate system, which basically means that the more money we make, the more taxes we pay. If you live in Ontario for instance, and you earn $60,000, your after-tax income is $48,724 — 18.79 percent of your income went to the federal and provincial government, even though your salary falls under the 29.65 percent marginal tax rate bracket.

There’s a complicated explanation to why your actual tax rate is lower than your marginal tax rate that can be found here, but the simple answer is that a salary of $60,000 falls within the lower end of a 29.65 percent tax bracket. Our progressive tax system means that even if you earn $200,000, you won’t be taxed on the first $10,000 of your income. Again, remember, the more you earn, the more you pay in taxes.

“Currently the highest possible statutory marginal tax rate, federally and provincially combined, is approximately 50%. However, effective tax rates are far below the marginal tax rates we commonly associate with our taxes,” write Shillington and Shaban.

“The Fraser Institute calculates a tax rate using average taxes and income, rather than median measures of taxes, which further inflates the tax rate calculation.”

In fact, according to the Broadbent Institute report, the Fraser Institute’s calculation of how much Canadians are taxed also includes “a host of various government fees and taxes beyond income tax that fosters a skewed perception of tax rates.”


“Fraser adds other things like corporate taxes and oil and gas royalties into the equation that we disagree can be so directly translated into taxes paid by families,” Broadbent’s Policy Director Jonathan Sas told VICE Money. Sas clarified that the Broadbent report does include, in addition to income taxes, GST and payroll taxes in its calculation of the 24 percent rate that the average family pays.

Canadians don’t just pay taxes on their incomes. They also pay taxes on goods and services — basically what you see as GST or HST on your bills. In Ontario at least, 13 percent of our daily spending on things like alcohol, food and cabs goes to the government.

Moreover, if you own a home, you pay property taxes to your local municipality — up to $2,500 on average for a one bedroom condominium. Then there are things like land transfer taxes when you buy a home and excise taxes on certain products like alcohol and cigarettes (that are built into the cost of the product). It certainly all adds up, but perhaps not to the extent that we think it does.

The key indicator however, on whether Canadians are too heavily taxed, is how much we actually get from paying taxes. For example, American marginal tax brackets aren’t too different from Canadians’, but yet we get universal healthcare and they don’t. The Scandinavian countries tax their citizens heavily, yet most of their citizens have a hefty social security net when the time comes to retire.

“Looking at Canadians in median income households, their benefit from public services amounts to $41,000 — equivalent to roughly 63 percent of their total income,” says a Canadian Centre for Policy Alternatives study released in 2009.

“For the vast majority of Canada’s population, public services are, to put it bluntly, the best deal they are ever going to get.”

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