TAX NEWS - JUNE 2010

Tax freedom day comes Saturday - Canada Tax

Saturday marks Tax Freedom Day – the day when the average Canadian family is released from the shackles of working just to pay the taxman and free to pocket the rest of the year's earnings.

This year, the relief date comes three days later than in 2009 but theoretically it should have come weeks later if the government were living within its means, according to the Fraser Institute, which calculates the day's arrival every year.

Workers in this country pay a litany of taxes including income taxes, sales taxes, property taxes, gas taxes and many more, said Niels Veldhuis, senior economist at the conservative think thank.

"Canadians have to have the debate about whether they are getting value for all this money we are sending to government," Veldhuis told QMI Agency.

The three-day delay is primarily due to Canada's improving economy as it emerges from recession, the institute said. As a family's income increases, so too does its tax burden.

Many provinces have also raised taxes over the last year, Veldhuis said.

Quebec, for example, hiked its gas and mining taxes, while British Columbia raised its health premiums, Saskatchewan and Manitoba are taxing tobacco more and Nova Scotia increased its total income and sales tax rates.

Tax Freedom Day would have come even later – by 25 days to be exact –if governments hadn't deferred the tax burden from unprecedented spending by running deficits, the institute said.

Veldhuis said mid-way through last year there was already evidence that federal stimulus dollars did little to boost the economy but rather it was the private sector that was driving growth.

"So that's one area where I think Canadians would question whether or not that money was wisely spent," he said.

Governments are not living within their means, Veldhuis said.

"Every single government across Canada, federally and provincially, is running a deficit and that of course means we are deferring some taxes into the future," he said.

Ottawa estimates it will rack up a $47 billion deficit this year, much of that stemming from its two-year $19 billion stimulus package.

The average Canadian family (with two or more individuals) will earn $92, 754 this year and pay $39,141 in taxes, representing more than 42% of their income.

That percentage was smaller last year, according to the Fraser Institute.

The total tax bill will increase 3.8%, or by $1,441, between 2009 and 2010 while income will increase by just 2%.

Still many are excited at the prospect of taking home on what they make from here on in.

"Ooh, it's June - another day closer to (Tax Freedom Day) when I'll be working for me and not to support the state!" a Twitter user posted to the mirco-blog Tuesday.

Tax Freedom Day varies from province to province with Alberta enjoying the earliest arrival, on May 19. Workers in Saskatchewan have to wait the longest with Tax Freedom Day landing on June 16 this year.

There's no doubt taxes pay for some essential services, the question is whether Canadians are getting value for their tax dollars, Veldhuis said.

The Fraser Institute's calculations are based on forecasts of personal income, and on federal and provincial budget tax revenue.