Tax Freedom Day, the day when Canadians start working for themselves after paying off the total tax bill imposed on them by all levels of government, fell on Monday, June 6, two days later than in 2010, according to the Fraser Institute’s annual Tax Freedom Day calculations.
However, Tax Freedom Day is actually 16 days later, on Wednesday, June 22, if governments paid for their current levels of spending with additional taxes, instead of running deficits.
Tax Freedom Day is a simple, easy-to-understand measure of the total tax burden imposed on Canadian families by government. 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.
To highlight the wide array of taxes imposed on Canadians and to celebrate Tax Freedom Day in 2011, the Fraser Institute produced a new, humorous country music video that can be viewed at www.youtube.com and www.fraserinstitute.org
A later tax freedom day
The primary reason Tax Freedom Day falls on June 6 in 2011, two days later than 2010, is Canada’s improving economy. In 2010 and 2011 the economy rebounded following the recession and Canadians witnessed a later Tax Freedom Day in both years.
When an economy recovers and incomes increase, a family’s tax burden tends to increase to a greater extent because of Canada’s progressive tax system, which imposes higher taxes as Canadians earn more income.
Household consumption also rises, which results in an increase in the amount of sales and other consumption taxes that Canadian families pay.
Total tax bill
In 2011, the average Canadian family (with two or more individuals) will earn $93,831 (which includes not just wages and salaries, but interest, dividends, private and government pension payments, old age pension payments, and other transfers from governments) and pay a total of $39,960 in taxes, for a total tax bill amounting to 42.6 per cent of its income.
Among the many taxes Canadian families pay, income taxes increased the most — by $550 — while sales taxes jumped by $335.
Tax Freedom Day among the provinces
Tax Freedom Day varies from province to province, depending on the taxation levels of provincial and local governments.
Alberta continues to enjoy 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 on June 10. Newfoundland and Labrador has the latest Tax Freedom Day, June 19.
All Canadian provinces, except Saskatchewan and Newfoundland and Labrador, experienced a later Tax Freedom Day in 2011 than in 2010. Quebec recorded the largest increase in Tax Freedom Day, four days later than in 2010.
Several provinces, including Newfoundland and Labrador and Saskatchewan, have significant natural resources which provide the provinces with royalties.
However, there is an ongoing debate about whether natural resource royalties are actually a tax. If natural resources royalties are excluded from the Tax Freedom Day calculations, Tax Freedom Day is 26 days earlier in Newfoundland and Labrador, 10 days earlier in Saskatchewan, seven days earlier in Alberta, and three days earlier in British Columbia.
As is the case every year, Tax Freedom Day calculations are based on forecasts of personal income, and on federal and provincial budget tax revenue.
When final revenue numbers become available at the end of each fiscal year and personal income data are updated by Statistics Canada, Tax Freedom Day calculations for previous years are revised.
Canadians can calculate their personal Tax Freedom Day using the Fraser Institute’s Personal Tax Freedom Day Calculator at www.fraserinstitute.org.