OPINION: Governments' poor fiscal management raising Canadians' tax burden

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The cost of living and affordability remain top of mind for Canadians, so it’s critical to understand how taxes affect our household finances.

Canadians pay many different taxes (income taxes, sales taxes, fuel taxes, property taxes, etc.) so it can be hard to know how much you pay in total each year. While some of these taxes are visible – -for instance, you can check your income tax return to see how much you pay in personal income taxes – -many taxes are hidden or less visible.

To help Canadians understand how much we pay in taxes, each year Fraser Institute analysts calculate Tax Freedom Day — the day of the year when the average Canadian family has earned enough money to pay all taxes levied by the federal, provincial and local governments.

In other words, if Canadians had to pay all their taxes up front, Tax Freedom Day is the day of the year Canadians get to start keeping the money they earn.

This year, the average Canadian family (of two or more people) will earn $158,533 in income and pay an estimated $68,266 (or 43.1%) in taxes.

So, if we paid all our taxes for 2025 up front, the average Canadian family would pay the government every dollar they earn until June 8. After working for the first 158 days of the year for the government, we now get to work for ourselves.

This year’s Tax Freedom Day of June 8 comes one day earlier than last year — meaning the average Canadian family must work one less day to pay off its total tax bill — because the average family’s income rose faster (5.2%) than its total tax bill (4%) partly due to tax changes from governments across the country.

For example, Prince Edward Island lowered its business tax rate, Nova Scotia cut its HST rate, and both Alberta and the federal government reduced (or have committed to reduce) personal income tax rates. These changes all act to slow the growth in the amount governments collect in taxes.

Despite these changes that slow growth in the tax burden today, poor fiscal management by governments across the country is raising the tax burden Canadians may face in the future.

The federal government will run a projected $42.2-billion deficit this year (though the Mark Carney government’s election platform suggests the deficit may actually reach $62.3 billion). In addition, combined, provincial governments across the country will run projected deficits totalling $42.7 billion.

To pay for today’s debt accumulation, future generations of Canadians may face higher taxes.

Canadian families must work nearly half the year before they are free from their tax burden.

Unless governments across the country finally get their finances in order, Tax Freedom Day will likely only come later in the future.

— Jake Fuss and Grady Munro are analysts at the Fraser Institute.