Income Tax Just Part of Our Total Tax Bill

As we come to the end of another tax season, some Canadians will be eagerly awaiting an unexpected refund, while others will be frustrated by having to dig deep to pay an amount owing. For most Canadians, regardless of unexpected refunds or balances owing, the tax deadline provides a sobering reminder of just how much income tax they paid last year.

Of course, there are many of us who happily pay our income tax, thinking of the numerous government programs that our tax dollars finance: health, education, the military, etc. But the question all Canadian taxpayers must answer for themselves is whether or not we are getting our money's worth for the taxes we pay. Before they can answer this question, Canadians need an accurate picture of their total tax bill. To get this picture, Canadians have to look well beyond their income tax returns.

The reality is that income taxes form only a portion of the total tax bill imposed on us by Canadian governments - federal, provincial and local. In 2007, the average Canadian family consisting of two or more people earned approximately $83,775 in income, and paid $13,510 in income taxes. Personal income taxes however, represent only about one-third of our total tax bill.

Two other significant taxes that we deal with on our tax returns are the Canada Pension Plan (CPP)-Quebec Pension Plan if you're a resident of la belle province-and Employment Insurance (EI). In addition, residents of British Columbia, Alberta, Ontario, and Quebec, also pay health care taxes through either direct premiums or payroll taxes. All told, the average Canadian family paid some $8,045 in CPP, EI, and health taxes in 2007.

There are two other relatively visible taxes that we pay during the year: property taxes and sales taxes. The average Canadian family paid about $2,800 in property taxes in 2007. One of the common misconceptions is that only homeowners pay property taxes. The truth of the matter is that property taxes for renters are included in their monthly rent, so in one way or another we all pay property taxes. For homeowners, at least the cost of property taxes is transparent since we each receive an annual bill.

Sales taxes are visible whenever we make a purchase upon which the tax is implied. Calculating the amount of sales taxes paid however is difficult in that it requires people to track all of their purchases of taxable goods and services. Our estimates indicate that the average Canadian family pays about $6,070 a year in sales taxes, representing almost 16 per cent of their total tax bill.

In addition to personal income taxes, payroll taxes, property taxes, and sales taxes, which are all visible to a certain degree, there are a host of taxes that we pay but do not see. For instance, profit taxes amounting to approximately $3,440 in 2007 were assessed indirectly on average Canadian families. Taxes on liquor, tobacco, and amusement amounted to $2,320 for the average Canadian family, while automobile and gas taxes totaled about $975. Finally, average Canadian families were assessed about $320 in import duties in 2007, another cost which is not easily discernable.

Summed up, the average Canadian family faced a tax bill of $38,990 in 2007 against income of $83,775. The total taxes imposed on the average Canadian family consumed 46 per cent of its income. In other words, average Canadian families hand over nearly half of their income to Canadian governments.

It is critical that Canadians understand that the taxes delineated on our income tax returns represent less than half of our total tax bill. Understanding our total tax bill will enable each of us to better assess whether or not, we as taxpayers, are receiving value-for-money. Our hope is that such understanding will lead to more pressure for real and meaningful tax relief for Canadians in the future.

At the very least, a better understanding of our total tax bill will allow us to hold our politicians much more accountable for the resources they extract from us.