According to the Fraser Institute, Canadians pay about 43% of their income in taxes. Now not all of that is income taxes, which really depend on your income. To test their tax estimate against my own situation, I tracked all the taxes I paid throughout the year. Today’s episode reveals how much I paid, and how I stack up against the Fraser Institute’s estimates.
Here’s a summary of the Fraser Institutes Taxes for the average family, based on province:
| NL | PE | NS | NB | QC | ON | MB | SK | AB | BC | CDA | |
| Income | 106,213 | 90,834 | 96,363 | 92,570 | 98,858 | 121,649 | 113,300 | 120,788 | 137,398 | 114,810 | 115,724 |
| Income Taxes | 18,020 | 13,099 | 15,841 | 13,355 | 15,110 | 17,173 | 16,507 | 17,109 | 22,178 | 15,334 | 17,232 |
| Payroll & Health Taxes | 8,198 | 7,077 | 7,377 | 7,777 | 10,398 | 11,305 | 8,551 | 8,083 | 9,652 | 9,677 | 10,474 |
| Sales Taxes | 8,786 | 7,310 | 7,657 | 7,452 | 7,710 | 8,498 | 8,272 | 8,644 | 3,745 | 7,255 | 7,738 |
| Property Taxes | 2,427 | 2,496 | 3,764 | 3,922 | 3,853 | 5,281 | 3,632 | 3,541 | 3,960 | 4,648 | 4,406 |
| Profits Taxes | 3,850 | 3,274 | 4,271 | 2,964 | 4,389 | 5,054 | 3,582 | 4,650 | 3,862 | 4,302 | 4,451 |
| Liquor, Tobacco, amusement, excise taxes | 3,247 | 2,195 | 2,406 | 2,429 | 2,013 | 2,270 | 2,799 | 2,816 | 3,202 | 2,823 | 2,490 |
| Auto, fuel, motor vehicle, carbon taxes | 1,828 | 1,006 | 1,140 | 1,364 | 1,313 | 1,525 | 1,460 | 1,810 | 2,075 | 1,793 | 1,588 |
| Other taxes | 1,817 | 1,027 | 579 | 769 | 773 | 1,148 | 2,175 | 1,337 | 2,460 | 1,608 | 1,301 |
| Import Duties | 387 | 309 | 353 | 320 | 344 | 441 | 392 | 447 | 546 | 424 | 423 |
| Natural Resource Levies | 2,505 | 0 | 28 | 118 | 206 | 27 | 47 | 1,241 | 1,037 | 622 | 361 |
| Total Tax Bill | 51,065 | 37,794 | 43,416 | 40,471 | 46,108 | 52,723 | 47,417 | 49,678 | 52,717 | 48,486 | 50,464 |
I’ll go into more detail what each of these are, and how my personal taxes compared to the Ontario breakdown.
| Fraser Institute’s Estimate for Ontario | My Estimate | |||
| Total Taxes | Excluding CPP & Profit Taxes | |||
| Income | 121,649 | |||
| Income Taxes | 17,173 | 14% | – | – |
| Payroll & Health Taxes | 11,305 | 9% | 7% | 2% |
| Sales Taxes | 8,498 | 7% | 2% | 2% |
| Property Taxes | 5,281 | 4% | 4% | 4% |
| Profits Taxes | 5,054 | 4% | 4% | 0% |
| Liquor, Tobacco, amusement, excise taxes | 2,270 | 2% | 0% | 0% |
| Auto, fuel, motor vehicle, carbon taxes | 1,525 | 1% | 0% | 0% |
| Other taxes | 1,148 | 1% | 1% | 1% |
| Import Duties | 441 | 0% | 0% | 0% |
| Natural Resource Levies | 27 | 0% | 0% | 0% |
| Total Tax Bill | 52,723 | 43.3% | ||
| Non-Income Taxes | 29% | 18% | 10% | |
These are the taxes you pay on a regular basis through employer deductions, through quarterly payments, and/or at tax time. Of course, the amount of income taxes mainly depends on the amount of income you earn. As a single individual with no dependents, I am not eligible for as many tax breaks as a family with children would be. Therefore, income being equal, I’d pay more income tax than a family in the study would. When I compared average income tax rate to the study, mine was much higher. You can calculate your income taxes very easily. Just take your total tax owing (line 435) and divide it by your net income (line 150) from your most recent tax return. You can learn more about how Canadian income tax is calculated here.
These include things like CPP and EI and health taxes, which are paid through employer deductions or paid when you complete you tax return each year for self-employed individuals. The Ontario Health Premium ranges from $0 to $900, depending on your income.
I don’t view CPP as a tax. Yes, it is mandatory, but it’s really savings, since paying into CPP will provide you with retirement income beyond age 60, disability income if you are eligible, and survivor benefits if you pass away with a spouse and/or dependents. CPP contributions start at 5.10% (in 2019) of your income, but as you earn higher amounts above the CPP cap of $57,400 and max out the payments, it becomes lower in proportion to your total income.
EI is insurance in case you lose your job, become sick, take a parental leave, or have to take time off work to care for sick relatives. However, since it’s mandatory, it can be viewed as a tax. If you never use it, you don’t receive any benefits.
Even including CPP as a “tax” I only paid 6.6% of my income in these taxes, compared to 9.3% for Ontarians in the study. Excluding CPP, this falls to 2.3% of income.
This includes GST (goods and services tax), HST (harmonized sales tax), and PST (provincial sales tax). Depending on where you live in Canada, you’ll either pay a combined HST tax, or GST plus PST. Sales tax is charged on most products and services. Some of the more common exceptions are: basic groceries, prescription drugs & health services, certain medical devices, feminine hygiene products, house sales and rent, child care services, educational services and music lessons, bank fees, and government services. Ontario consumers pay an HST rate of 13% on their purchases. When I estimate how much I pay in sales tax as a proportion of my spending not including rent and travel (which typical isn’t in Canada), it’s only 8.6%. This is lower than the 13% tax because not all my expenditures incur sales tax. The amount of tax in proportion to my income was only 2% compared to 7% in the study. The 7% of income going towards sales tax in the study seems high to me, since that would mean that Ontario families spend 70% of their after-tax income on expenditures that incur sales taxes. Since savings, groceries and housing don’t incur sales taxes, that seems like a lot of discretionary spending.
Whether you own your home and pay property tax to your municipality, or you rent and implicitly pay property tax through your landlord, we all pay property tax in one way or another. The amount of property tax depends on where you live. According to a study by Zoocasa in 2018, property tax rates can range between 0.25% and 1.79%. In Waterloo, property taxes are 1.1%. I crudely estimated that I spend about 3.5% of my income on property taxes, which is a bit lower than Fraser Institute’s estimate of 4.3%. This makes sense since I live in a one-bedroom apartment, which presumably has lower taxes than the average Ontario family.
These include things like capital gains taxes on investments outside of tax-sheltered accounts. Since I’m still working on maxing out all my tax-sheltered accounts, this was $0 for me. The Fraser Institute argues that Canadians ultimately bear the tax that is charged to corporations, through lower wages and higher prices, which is included in their profits taxes. However, to include that as a tax based on Canadian’s individual income ignores the earnings retained by corporations and is an apples to oranges comparison. I’ve chosen to show both scenarios where I include and exclude the profits taxes. Excluding it means that I pay 0% of my income towards these taxes while including it means I pay 4% of my income towards profits taxes.
Alcohol, Tobacco & Cannabis Taxes are sometimes called sin taxes. These are additional taxes on alcohol (beer, wine, and spirits), tobacco and cannabis purchases. They are somewhat complex and differ depending on the type of alcohol, tobacco, cannabis product and province. These taxes are already included in the price of the product, but I backed them out for my personal spending, which was only on alcoholic products. The amount I paid in excise taxes as a proportion of my income was negligible.
There are a couple of taxes embedded in the price of gas. In Ontario, HST is already included in the price of gas. But there is also an additional tax associated with gasoline, propane, and diesel. Unleaded gasoline incurs a tax of 14.7 cents per litre. Also, we have to pay to renew our drivers licences and vehicle registration. For me, these taxes were pretty small as a proportion of my income, since I don’t drive to work and therefore don’t purchase a lot of gas.
It’s hard to say specifically what other taxes in the Fraser Institute’s estimate are comprised of. However, they do argue that since governments are running deficits, we will eventually have to pay back those debts through higher taxes. I’ve simply used their 1% of income estimate for my total tax estimate.
These are also known as Customs duties and tariffs. If you’ve ever purchased anything from a small supplier outside of Canada, you may have gotten hit with an extra fee after the fact from the shipping company. This is because there are custom duties or tariffs charged on products coming outside of Canada. Most products we buy in Canada will already have these duties and tariffs embedded into the price of our products. I won’t even attempt to quantify that myself and use their estimates as my own.
Since natural resource levies is so small in Ontario, I’ll ignore that.
Based on my experience, the Fraser Institute’s estimates are way too high. If you count CPP contributions as savings and exclude taxes paid by corporations, my taxes were much less, even though my income taxes were higher than the average.
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