Canada's Tax Freedom Day Has Finally Arrived

by Mike Godfrey, Tax-News.com, Washington

01 July 2003

According to calculations from economic and social policy think tank the Fraser Institute, Canadians finally got to celebrate Tax Freedom Day on June 28 this year.

If a year was condensed down into a single working day, this would mean that the average Canadian works until 12.54 pm everyday, based on a 9 to 5 working day, just to pay the various levels of government.

Still, this year's figure is an improvement on the year 2000, when Tax Freedom Day did not arrive until July 2, the latest in the year it has ever fallen since calculations begin in 1961, according to the Fraser Institute. However, although TFD has been steadily creeping backwards since 2000, the Fraser Institute's director of fiscal studies, Jason Clemens, says that the figure is still somewhat alarming.

“The fact that Tax Freedom Day falls only four days earlier than its latest date ever should be a cause for concern. All the talk of tax relief has not resulted in meaningful reductions in the tax burden for most Canadian families,” Clemens told the Toronto Sun.

The average Canadian family paid an extra $1,263 in taxes between 2002 and 2003, according to the Institute, despite talk of tax cuts by the federal and provincial governments in recent years. According to reports, the largest proportion of the increase went towards social security, medical and hospital funding.

“Recent strong economic growth should have paved the way for reductions in both personal and business taxes to ensure lasting competitiveness. Unfortunately, the majority of tax gains were dedicated to increases in government spending,” the Fraser Institute's fiscal studies director pointed out.

Nevertheless, Clemens believes that Tax Freedom Day will continue to follow a downward trend in the years to come, as tax reforms begin to work their way into the system. “The federal and many provincial governments have cut personal and business tax rates in recent years, tax brackets and exemptions have been, or will soon be, indexed to inflation in most Canadian jurisdictions and the massive increases in Canada and Quebec Pension Plan contributions begun in 1997 will be completely phased in this year,” he noted.

The Canadian provinces also have their Tax Freedom Day calculated by the Fraser Institute, and the results have shown that in all of the provinces but Alberta and Saskatchewan, the date is falling later. The earliest Tax Freedom Days have traditionally been in the Atlantic provinces, and Newfoundland and Labrador celebrated theirs on June 8 this year. Meanwhile, Quebec and British Columbia taxpayers must wait until July 2 before being allowed to spend their own money.

These latest calculations highlight the vast gulf between the United States and Canada in terms of their respective tax burdens. Tax Freedom Day in America fell this year on April 19 and with President Bush's latest program of tax cuts already working its way into the US economy, this gap is likely to grow wider in the coming years.

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