Canadians Celebrate Canada Day and Tax Freedom Day on July 1
Contact:
Michael Walker, Executive Director
The Fraser Institute, (604) 714-4545, Email: michaelw@fraserinstitute.caJoel Emes, Research Economist
The Fraser Institute, (604) 714-4546, Email: joele@fraserinstitute.caRelease Date: 29 June 1999
Vancouver, BC >>> This year Canadians will celebrate Tax Freedom Day at the same time they are celebrating Canada Day, according to calculations released today by The Fraser Institute. That means Canadians will work until June 30 to pay the total tax bill imposed by all levels of government. This represents a four day improvement over 1998 when Tax Freedom Day fell on July 5 (based on revised provincial and federal budget numbers), one day later than in 1997.
"It should add to the Canada Day celebrations that in 1999 we see a break from the ramping up of taxes. The levelling off of taxes in 1997 and 1998, coupled with a four day drop between 1998 and 1999 means there is good reason to hope that 1998 was the 'high water mark' for Tax Freedom Day in Canada." says Michael Walker, the Institute's Executive Director.
Tax Freedom Day this year is 59 days later than it was 38 years ago. In 1961, the earliest year for which the calculation has been made, Canadian Tax Freedom Day was May 3. By 1974, the date had advanced to June 8.
The Fraser Institute has been researching the comprehensive tax burden for the average family in Canada and each of the provinces since 1977. The Institute calculates Tax Freedom Day in order to provide a simple, easy reference point about the impact of the most complex and intrusive activity of government-its tax collecting apparatus. Tax Freedom Day is the day of the year that Canadians finally start working for themselves. All money earned prior to this day goes to one of three levels of government: federal, provincial, or local.
For the first time ever, Canadians will be able to calculate their own individual tax burden using The Fraser Institute's new Personal Tax Freedom Day Calculator, located on the Institute's web site at www.fraserinstitute.ca.
The total tax bill used to compute Tax Freedom Day includes income taxes, property taxes and sales taxes and also encompasses profit taxes, health, social security and employment taxes, import duties, license fees, sin taxes, natural resource fees, fuel taxes, hospital taxes and a host of other levies imposed by all three levels of government.
The 1998 to 1999 decline in tax burden is to some extent the result of more prudent fiscal conduct by the various levels of government, demonstrated by the fact that eight provinces and the federal government expect to have balanced budgets this year. In addition, the federal government, and all provinces except Newfoundland and Prince Edward Island, have cut income tax rates in recent years. This Tax Freedom Day improvement is also a reflection of a strong economy.
While all Canadians face more or less the same federal tax structure, Tax Freedom Day for each province varies according to the extent of the provincially levied tax burden. The earliest 1999 provincial Tax Freedom Day fell on May 28 in Newfoundland. The latest date is July 13 in Quebec. The Atlantic provinces historically have the earliest Tax Freedom Days due, in part, to the large share of their total revenue that comes from other provinces through the federal government (as shown in Table 9).
Table 6 shows Tax Freedom Days for Canada and for each of the provinces for 1981, 1985, 1992, 1998, and 1999. Although the federal government and several provinces have cut income tax rates recently, the effect of these rate cuts, with the exception of those in Ontario, are small. That impact may grow, however, as previously announced cuts are fully implemented.
Alberta has the fourth earliest Tax Freedom Day for 1999 thanks to a five day decline from 1998.
Manitoba ranks sixth with no change in its Tax Freedom Day from 1998. Although several other provinces have had declines they still have later Tax Freedom Days than Manitoba because their date was much later in previous years. Manitoba's tax burden has historically been lighter than all but the Atlantic provinces. Like the Atlantic provinces, Manitoba draws a significant portion of its revenue from the federal government.
Saskatchewan, at seventh position shows the strongest income growth of any province between 1998 and 1999.
Ontario, at eighth is one of five provinces that shows a drop in its total tax bill between 1998 and 1999. Ontario is one of three provinces that had the same Tax Freedom Day in both 1997 and 1998; five provinces had later days in 1998 than in 1997 and two provinces, had earlier days in 1998 than in 1997.
British Columbia, which ranked ninth, along with Prince Edward Island, had only small increases in cash income. While many provinces show a three or four day decline in Tax Freedom Day, British Columbia residents can expect only two days relief over 1998.
As usual, the latest Tax Freedom Day is in Quebec as that province exerts its tax pressure against families in a much more aggressive fashion than other provinces in spite of the fact that, like the Atlantic provinces and Manitoba and Saskatchewan, it receives a relatively significant fraction of its revenue from other provinces through the federal government.
In addition to the size of the average family's tax bill, there are also concerns about the fairness of the Canadian tax system. The distribution in Table 8 shows that the top 30 percent of income earners pay 64.2 percent of all taxes and earn 56.4 percent of all income. The bottom 30 percent of all income earners pay 4.9 percent of all taxes and earn 10.0 of all income. This distribution shows that the tax system is effectively progressive and extracts proportionately more money from those on the higher end of the income scale.
Methodology
Tax Freedom Days have been calculated on the new base introduced last year (Statistics Canada's Social Policy Simulator Database and Model [SPSD/M]) for 1992 through 1999. Statistics Canada recently undertook a revision of its National Accounts and Provincial Economic Accounts. They were only able to provide new data back to 1992; pre-1992 Tax Freedom Days will be re-calculated when Statistics Canada completes the historical revision. Statistics Canada was not able to provide the detailed provincial breakdown of many of the inputs to the Tax Freedom Day model for 1997; as a result, 1997 Tax Freedom Days can not be finalized until the fall.
Tables
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
To view this media release online or to use the Personal Tax Freedom Day Calculator, visit our web site at www.fraserinstitute.ca. For further information:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
For more information, visit Tax Facts 11.
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