The Fraser Institute recently came out with a study of how the average Canadian family’s total tax bill hs changed from 1961 to 2015. The emotional impact of their conclusions exploits the fact that the “average” family is different from the “typical” family.
Before continuing with some criticism of this report, let me explain that I’m not on either extreme end of the often polarized debate on taxes. I’m no fan of government waste. Canada’s public sector does a poor job of removing employees who do their jobs poorly. This leads to an accumulations of poor employees and is demoralizing for strong public sector employees who must work alongside poor employees. All that said, I’m not a cheerleader for reducing all forms of public spending either.
When the Fraser Institute examines the “average” family’s income, they are adding up the incomes of all families and dividing by the number of families to get $80,593. If this figure sounds high, it’s likely because you are thinking of the “typical” or “median” family whose income is such that half of families make more and half make less. Most families make less than $80,593 per year, but smaller numbers of high income families drive up the average.
While the average family paid $34,154 in taxes in 2015, the typical family paid quite a bit less. The $34,154 figure is meant to inflame us, but it is mainly a reflection of the fact that people with high incomes pay a lot of tax. A more meaningful figure for most people would be how much the median family pays in taxes. Even more meaningful would be to give the taxes paid for each of several family income levels. That way you could look up your income and decide whether or not to be outraged by the total amount of tax you pay.
Another prominent conclusion of this report is that “The average Canadian family now spends more of its income on taxes (42.4%) than it does on basic necessities such as food, shelter, and clothing combined (37.6%).” We’re supposed to be angered by this fact, but there are two changes that led to taxes growing larger than the cost of necessities. One is that taxes rose, but the other is a positive thing: the cost of necessities has risen slower than our incomes since 1961.
I would be very happy to see Canada’s public sector become more efficient and consume less of our incomes through taxes, but the methods used in this report to make the case that taxes are high don’t sit well with me.