You Pay More On Taxes Than Necessities

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Descartes
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You Pay More On Taxes Than Necessities

Post by Descartes » 23 Aug 2016 09:58

An interesting report from the Fraser Institute. You can get the full report pdf through the link.
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%). By comparison, 33.5% of the average family’s income went to pay taxes in 1961 while 56.5% went to basic necessities.
The list of taxes was interesting as well. The average Canadian family made $80,593 but paid $34,154 in taxes of all sort last year:
- $10,616 income tax
- $7,160 payroll and health taxes
- $4,973 sales taxes
- $3,832 property taxes
- $7,573 from other categories including taxes on profits, liquor or tobacco, fuel, natural resources and import duties.
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Re: You Pay More On Taxes Than Necessities

Post by kcowan » 23 Aug 2016 10:17

In my ignorance being retired for 14 years, I am not aware of how an individual or family can pay payroll taxes, health taxes and taxes on profits. I suppose these could be from a family business?
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Re: You Pay More On Taxes Than Necessities

Post by NorthernRaven » 23 Aug 2016 11:28

Descartes wrote:An interesting report from the Fraser Institute. You can get the full report pdf through the link.
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%). By comparison, 33.5% of the average family’s income went to pay taxes in 1961 while 56.5% went to basic necessities.
People seem to think that taxes are somehow money burnt in a fire or something. Setting aside one's views on the quality, necessity, sustainability or efficiency of any particular government service, there is something being provided. For instance, that average family is providing themselves future OAS payments (by paying for current OAS payments to others via tax revenue). That's around $14K annually in retirement income (assuming a couple with no clawback). You'd want to figure out the purchase cost of some sort of similar deferred annuity.

I notice the reference year is 1961. While I'm sure the Fraser Institute would never, ever try to slant a comparison, 1961 is prior to the introduction of CPP, OAS/GIS in anything like its current form, and much of Medicare, among other things. That average family may be paying a higher percentage of income in taxes, but it is also receiving back additional services, and a simple numerical comparison is somewhat bogus. If one is interested in privatizing everything, eliminating progressive taxation, reducing the social safety net, bringing back workhouses, or whatever, fine, but hiding behind simplistic tax whines doesn't impress me very much.

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Re: You Pay More On Taxes Than Necessities

Post by CROCKD » 23 Aug 2016 12:01

From NorthernRaven

As usual a thoughtful post. :thumbsup:
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Re: You Pay More On Taxes Than Necessities

Post by Descartes » 23 Aug 2016 12:02

Take a moment and perhaps read TFA before replying. ;)

In reference to your response:
Take a look at figure 4.
Taxes were under necessities up to 1981 and again dipped under for the last time in 92.
Although I could be mistaken, I believe CPP and OAS/GIS had been introduced before that.
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Re: You Pay More On Taxes Than Necessities

Post by slim » 23 Aug 2016 12:28

This reflects the growth of government. Size and remuneration.
The public sector did not make a lot in those days. The advantage was security of employment.
Over time the public sector has become highly rewarded compared to the private sector. This has to be paid for.

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Re: You Pay More On Taxes Than Necessities

Post by NorthernRaven » 23 Aug 2016 12:54

Descartes wrote:Take a moment and perhaps read TFA before replying. ;)
Take a look at figure 4.
Taxes were under necessities up to 1981 and again dipped under for the last time in 92.
Although I could be mistaken, I believe CPP and OAS/GIS had been introduced before that.
I don't know what "necessities" might have been doing over the years, but from 1974 onwards taxes as a percentage of income isn't much below 41% except an odd outlier of 36% in 1976. It goes up as around 46% in 2000, and has sunk to the current 42% level.

I'm not sure what point is being made. Over 50-60 years, all sorts of things could be happening to "necessities" - clothing prices have generally gone down substantially, I think, for instance. On the tax side, healthcare costs have risen substantially above inflation, so whatever category those go into is going to increase. There's all sort of effects one would want to know were accounted for or roughly cancel out - is "average family" the average family of 1951 versus the average family of 2016, or a similarly sized family over the years - family sizes and compositions have changed signficantly in the past 60 years. Trying to compare 1961 apples to 2016 oranges in such a simplistic way is in some ways just a "bigger number is bad" exercise.

If one think taxes are too high, one should identify the expenditure items that one thinks should be eliminated, and propose that.

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Re: You Pay More On Taxes Than Necessities

Post by like_to_retire » 23 Aug 2016 13:47

NorthernRaven wrote:If one think taxes are too high, one should identify the expenditure items that one thinks should be eliminated, and propose that.
I propose no more $3700 limousine luxury lexus car rides by MP's. :wink:

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Re: You Pay More On Taxes Than Necessities

Post by adrian2 » 24 Aug 2016 09:15

like_to_retire wrote:
NorthernRaven wrote:If one think taxes are too high, one should identify the expenditure items that one thinks should be eliminated, and propose that.
I propose no more $3700 limousine luxury lexus car rides by MP's. :wink:
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...
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Re: You Pay More On Taxes Than Necessities

Post by adrian2 » 24 Aug 2016 10:23

Agreed (but that's all a small peon can see and complain about).
Perhaps taxpayers get so angry about politicians’ expenses for the simple reason that small figures are comprehensible. It is easy to get exercized about a cabinet minister who spends $18 on a glass of orange juice, because we all know the worth of a glass of orange juice. But, say, $4.79-million on “grade paving” for Toronto’s transit system, as Mr. Trudeau announced in his infrastructure package on Tuesday? Hard to know if that’s the price or not.

Politicians and taxpayers are not wrong to wave their finger at ministers, members and senators who become too self-entitled to their entitlements. The fact that Ms. Philpott’s use of a party loyalist’s overpriced car service will now be investigated by the federal ethics commissioner is proof of that.

But anyone truly worried about government spending needs to set their sights higher. That $1.5-billion in Ontario transit spending announced on Tuesday? It’s just one small piece of a Liberal plan to spend $125-billion on infrastructure over the next 10 years. One-hundred-and-twenty-five. Billion.

That’s where the real money is, and where the real waste can happen. The nickel-and-dime stuff has its place, but it is more theatre than real fiscal accountability.
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Re: You Pay More On Taxes Than Necessities

Post by longinvest » 24 Aug 2016 10:30

Taxes pay for a lot of my necessities: roads and bridges for my car, public transportation when I need it, parks and public libraries for my leisure, schools and universities for my education, hospitals and doctors for my health, police and army for my security, and lots and lots of other things and services.

I'm quite happy to share the costs of it with others! :wink:

Shouldn't this kind of "rant thread" go into the water cooler?
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Re: You Pay More On Taxes Than Necessities

Post by Descartes » 24 Aug 2016 10:49

longinvest wrote:Taxes pay for a lot..
Not really the point of the report. Read again.
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Re: You Pay More On Taxes Than Necessities

Post by kcowan » 24 Aug 2016 11:17

CROCKD wrote:From NorthernRaven

As usual a thoughtful post. :thumbsup:
+1
That was my thought as well. Pharmacare, expanded Medicare and the Trans-Canada Highway spring to mind since 1961.
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Re: You Pay More On Taxes Than Necessities

Post by NorthernRaven » 24 Aug 2016 11:39

Descartes wrote:
longinvest wrote:Taxes pay for a lot..
Not really the point of the report. Read again.
Perhaps you could summarize what you think the point of the report is. They create a somewhat artificial category of "necessities", and imply that it is somehow bad that an "average family" pays more in taxes than it spends on these "necessities". Perhaps that's so, but perhaps not, and it really depends on how the expenditures are sliced up. If you are a fairly strict "small government" type, these sorts of exercises can be a way to delegitimize taxes and publicly provided services. No one likes taxes, but as a society we've also discovered that we dislike not having many of the things we provide for ourselves with taxes even more. Ideally, those things that can best be provided or regulated by government are, and those that aren't, aren't; opinions differ on specific cases... :)

For necessities, take meat; as a food purchase, it would be in there. But what a consumer wants is safe and healthy meat, in their kitchen so they can cook it. "Taxes" is contributing to meat inspections, to transportation infrastructure to get the meat to the supermarket and the consumer to get there and back, and so on. If meat inspections are private and all roads are user-tolled, costs may switch categories. One would certainly want to dig into what is going into the "taxes" portion of the report, but the broader point is that "taxes" may be covering some of the true costs of "necessities".

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Re: You Pay More On Taxes Than Necessities

Post by Descartes » 24 Aug 2016 12:08

NorthernRaven wrote:Perhaps you could summarize what you think the point of the report is
Certainly.

Taxes paid by the average Canadian have exceeded the cost of food+shelter+clothing (hereafter referred to as the "necessities") since 1992.
Prior to 1981 we always paid less in taxes than "necessities".

Please note these dates are after the introduction of modern CPP, OAS, GIS, the Trans-Canada highway, and "medicare" (i.e. the Canada Medical Care Act).

Why would taxes have exceeded "necessities" since 1992 if both are affected similarly by inflation?

Have the, by definition, "non-necessary" services provided to the average Canadian improved enough to explain the divergence since 1992 or does this indicate growing inefficiencies and bloat in our government?

Discuss (but please read the required material first). :P
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Re: You Pay More On Taxes Than Necessities

Post by NorthernRaven » 24 Aug 2016 13:04

Descartes wrote:
NorthernRaven wrote:Perhaps you could summarize what you think the point of the report is
Certainly.

Taxes paid by the average Canadian have exceeded the cost of food+shelter+clothing (hereafter referred to as the "necessities") since 1992.
Prior to 1981 we always paid less in taxes than "necessities".

Please note these dates are after the introduction of modern CPP, OAS, GIS, the Trans-Canada highway, and "medicare" (i.e. the Canada Medical Care Act).

Why would taxes have exceeded "necessities" since 1992 if both are affected similarly by inflation?

Have the, by definition, "non-necessary" services provided to the average Canadian improved enough to explain the divergence since 1992 or does this indicate growing inefficiencies and bloat in our government?

Discuss (but please read the required material first). :P
I think "both are affected similarly by inflation" and "by definition, non-necessary" are the key points. If someone needs say, an operation, or an expensive drug, that's certainly necessary in the colloquial sense that Fraser hopes people understand by their use of the word. But those expenditures will show up in "Other" or "Taxes". Conversely, one's purchase of some fab Jimmy Choo shoes is "Clothing", but not what most would think of as "necessary"! The shoes sort of things may not be overly significant, but the health sort of example certainly would. I'm pretty sure if you look at the cost of health care over the last 30 years it has increased far more rapidly than inflation - this is hardly a problem unique to Canada. That would probably account for an appreciable fractional increase in government expenditures by itself. But my basic point is that accepting some specific set of "necessary", "average", "income" and whatnot over 60 years from a specific (and interested) source, and assuming they and the story they are supported mean what people might think without understanding the details is potentially quite misleading.

Without understanding how the numbers are constructed, you can play all sorts of games with them. "Necessities" was 56% of income in 1961, but only 34% in 2010. Has government taxation really been grinding families into the ground since then and forcing them to give up a huge chunk of the necessities of life? I think not... :) Shouldn't the 10% "Other" from 1961 have been shrinking to cover these missing "necessities", instead of increasing to 20%? Or has "average income" (however defined here) been going up? Or have purchasing patterns been altering to increase items in Other, as opposed to non-necessary "Necessities"?

Or look at 1976. Taxes went from 43.4% in 1974, down to 36.2% in 1976 (and up to 40.8% in 1981). Does this mean that Trudeau-era economic policy produced a brief golden era in the early 1970's? I suspect you'd be hard-pressed to get even dedicated Liberals to go that far! Likely, it is probably due at least partly to oddities in the inflationary time before wage and price controls, or something like that. Bottom-line, assuming this report means "we are paying more for the same stuff we used to get from government" is a dangerous assumption, and for some items like healthcare where they are more expensive, it isn't obvious that they would be significantly less so if delivery was not by "Taxes".

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Re: You Pay More On Taxes Than Necessities

Post by brucecohen » 24 Aug 2016 13:14

kcowan wrote:In my ignorance being retired for 14 years, I am not aware of how an individual or family can pay payroll taxes, health taxes and taxes on profits. I suppose these could be from a family business?
No. In all of their reports on individual taxation, Fraser hypes the tax bite by taking all taxes and fees paid by all businesses and allocating them to individuals. Their rationale is that business increases consumer prices by $1 for each $1 of tax and fees it pays. It's a dubious proposition, but it works for them because hardly anyone reads the fine print. Also, the inclusion of all fees paid by business fails to recognize that some of those fees are for services that constitute family necessities. For example, builders putting in new subdivisions pay hefty development fees to local governments which have to build new infrastructure such as roads, sewers and schools. Fraser counts 100% of the development as tax but does not recognize the associated roads, sewers and schools as necessities.

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Re: You Pay More On Taxes Than Necessities

Post by adrian2 » 24 Aug 2016 13:21

brucecohen wrote: Also, the inclusion of all fees paid by business fails to recognize that some of those fees are for services that constitute family necessities. For example, builders putting in new subdivisions pay hefty development fees to local governments which have to build new infrastructure such as roads, sewers and schools. Fraser counts 100% of the development as tax but does not recognize the associated roads, sewers and schools as necessities.
Bruce, you are partly right, but partly not. :)

A local development fee is a tax, just as the HST paid on vitamins or feminine hygiene products is a tax.
The "raw" cost of roads, sewers and schools should be counted as necessities, but not the permits et al.
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Re: You Pay More On Taxes Than Necessities

Post by NorthernRaven » 24 Aug 2016 13:23

brucecohen wrote:
kcowan wrote:In my ignorance being retired for 14 years, I am not aware of how an individual or family can pay payroll taxes, health taxes and taxes on profits. I suppose these could be from a family business?
No. In all of their reports on individual taxation, Fraser hypes the tax bite by taking all taxes and fees paid by all businesses and allocating them to individuals. Their rationale is that business increases consumer prices by $1 for each $1 of tax and fees it pays. It's a dubious proposition, but it works for them because hardly anyone reads the fine print. Also, the inclusion of all fees paid by business fails to recognize that some of those fees are for services that constitute family necessities. For example, builders putting in new subdivisions pay hefty development fees to local governments which have to build new infrastructure such as roads, sewers and schools. Fraser counts 100% of the development as tax but does not recognize the associated roads, sewers and schools as necessities.
I was just looking at that business tax inclusion. It isn't clear exactly what they are doing, but wouldn't business taxes be effectively incorporated in the prices of the goods and services the consumer pays for? So if they include business taxes into the average family tax load, it is essentially double-counted. I would have thought that would be too bogus even for something like Fraser.

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Re: You Pay More On Taxes Than Necessities

Post by NorthernRaven » 24 Aug 2016 13:37

Fraser Institute wrote:Average Canadians also pay the taxes levied on businesses. Although businesses pay these taxes directly, the cost of business taxation is ultimately passed onto ordinary Canadians.
The first sentence seems to imply they are including business taxes, since they are paid by average Canadians. But the second sentence points out that they are passed on, so they would be in the prices of the purchased goods and services, and shouldn't be included in "Taxes" as well then, or somehow subtracted out. I couldn't find anything at first glance with more details on the methodology.

Average is a tricky thing - from StatsCan's 2012 Survey of Financial Security, the average net worth of Canadian households is $550K. But the median net worth was only $240K - the very wealthy households at the top of the distribution skewed the average upward. I'm not sure exactly how Fraser is defining "average family", but if it is somehow "all income" and "all taxes" divided by the number of households, that might be quite different from the experience of representative families with that 80K of 'income".

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Re: You Pay More On Taxes Than Necessities

Post by Davis » 24 Aug 2016 13:44

People set up businesses to facilitate transactions between economic agents (i.e., people). They don't exist for their own benefit, so a tax on a business is effectively paid by the various economic agents involved in the business: investors who provide capital, workers who provide labour, and consumers who buy goods and services from the business. Most people are all three of these agents at some point in their lives.

When a business is taxed, it will raise prices if it can, but sometimes it can't, like when it has competitors, especially foreign competitors. It could cut wages, unless it is in a competitive market for labour. If it can't raise prices or cut wages, it earns less profit, and has to reduce its dividends, and shareholders (including pension plans and the CPP Investment Board) receive less.

So to a degree, taxes on business in Fraser's model are already reflected in lower wages and smaller dividends.

"Too bogus even for Fraser"? What would ever make you think that?
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Re: You Pay More On Taxes Than Necessities

Post by newguy » 24 Aug 2016 14:38

Most of our taxes go to three things.
Capture.PNG
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The Social services has been flat at around 30% but I only show social assistance(welfare/oas/gis). There is a 'other' category that has been climbing to offset the decline, but I don't know what it is.

Health is the biggie but education is also using increasingly more and more as well. These two are what has to change if you don't want more and more taxes. Also note debt charges have been declining since the late 90's but that won't continue.

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Re: You Pay More On Taxes Than Necessities

Post by brucecohen » 24 Aug 2016 14:39

adrian2 wrote: A local development fee is a tax, just as the HST paid on vitamins or feminine hygiene products is a tax.
The "raw" cost of roads, sewers and schools should be counted as necessities, but not the permits et al.
I don't know to what extent, if any, municipalities and school boards earmark a development fee as opposed to just putting it into general revenue. Here is the builder's fee schedule for my township. There are two components: "development charges" and "planning fees." The development charges are itemized with discrete amounts for each service. For example, the builder of a new single or semi-detached house is dunned $825 for fire service and $34 for animal control. My guess is that these are notional allocations from general revenue, but it's also possible that each service has a contingency account to meet increased demand. The second category is clearly comprised of permit fees.

In any event, if Fraser counts a builder's $825 fire service levy as a tax -- which they do -- they should increase the comparative cost of family necessities by $825 or an amount amortized over some reasonable period of time, which they don't.

Similarly, Fraser's tax tally includes 100% of the tax we pay to fund medicare, but the necessities tally includes substantially less than 100% of the cost of our health care because the StatCan figure used covers only out-of-pocket expenses outside the medicare system.

Basically, the Fraser report is useless except as an ideological polemic.

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Re: You Pay More On Taxes Than Necessities

Post by Davis » 24 Aug 2016 17:00

And of course, the Fraser Institute wouldn't deign to remove from the equation money transferred back to people directly through CPP, OAS, GIS, child tax credits, EI benefits and so forth, even though it includes as "tax" CPP and EI contributions. People would love to pay less tax, but be enraged if transfers were taken away.
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