In 2009, governments at all levels in Canada raised a total of $586 billion in revenues most of which comprised some form of taxation. Total spending by governments at all levels was about $800 billion, the excess funded by debt. There is some double counting (the federal government transfers about $60 billion to Provinces and the Provinces transfer about $60 billion to municipalities). Debt is used to fund government outlays not funded by revenues, and in 2021 public debt (government debt at all levels) was about $2.9 trillion or approximately $75,000 per Canadian.
It is not as if Canadians don’t have debt of their own in addition to the debts incurred by their governments. Mortgages, credit cards, lines of credit, payday loans and a plethora of other instruments add up to a whopping $2.2 trillion in household debt or another $55,000 per Canadian.
Is there anyone not in politics that thinks this is sustainable? Common sense says no.
Median family incomes across Canada were $71,700 after taxes in 2014.
Those data are useful for illustrating the wide differences by Province but not much assistance in describing income per person or per family before taxes.
Statistics Canada reports income per family and unattached person (hardly a useful datum) of $62,900 in 2019.
Since the tax system includes not only income taxes, realty taxes and consumption taxes, gross government spending per taxpayer is a more sensible number. If only our governments released such simple numbers. But they don’t. I approach this issue by “backing into” the number. There were in 2019 27 million tax filers in Canada. I assume pretty well all spending comes from money provided by tax filers directly or indirectly. If you divide total government spending by the number of tax filers, you get a figure for the amount of taxes per tax filer needed to have a balanced budget. The 2009 figure is $800 billion divided by 27 million = about $30,000 per tax filer. 1 Of course that does nothing to repay the $2.9 trillion of government debt outstanding.
The typical Canadian family pays 42.5% of their income in taxes including all levels of taxation. Those payments fall short of enough to fund government expenditures resulting in the growing debt mentioned previously.
According to Canada Revenue Agency, the bottom 50% of tax filers have an average income of $19,000 and pay no taxes. This group of 14 million people needs and typically receives support, not taxation. The top 10% of taxpayers comprises about 3 million people who have an average income of $174,000. The remaining 12 million tax filers have an average income $63,000. The left wing dream of “income equality” cannot be achieved by taxing $101,000 from every one of the top 10% and giving those funds to the bottom 50%, which would not provide even half the necessary funds. “Income equality” would be about $36,000 per tax filer and $30,000 of that would be needed to pay the taxes necessary to meet governments’ current level of expenditures. Efforts to achieve income equality create a disincentive to work, innovate or make any effort to create a better life for one’s family. Seen as a socialist dream, the historical record in Russia, China, Cuba and Venezuela shows the concept to be a nightmare with millions of corpses to explain.
Can Canada balance the books? It is plain and obvious that Canada cannot, even with draconian measures that impoverish every Canadian. Spending must come down if debt is ever to be repaid.
One example regime is to replace all existing government revenues with a simple formulaic taxation system where all taxes are paid directly by individuals with a tax rate of zero for the bottom 50%; a tax rate of 30% for the next 40% and a tax rate of 60% for the top 10%. I estimate that regime would raise a total of $302 billion for the 40% group and $313 billion from the top 10% for total government revenues of $615 billion, slightly more than the current aggregate government revenues. Property taxes, Harmonized Sales Taxes and other forms of taxation disappear. Allocation of tax revenue among federal, provincial and munipal governments could be done soley by capitation.
Governments would have to roll over existing debts without increasing total government debt. Rates on the outstanding debt would be left to the market and governments would have to manage spending to match revenue.
Of course, that would take most of the fun out of governing. What is the point of having power if you can’t use it to support special interests with grants or tax breaks; expand programs to buy votes with the voters own money; or, feather the nests of elected officials and civil servants? Simple answers are not popular because they are hard to manipulate and simple to police and enforce.
Canada is a complex country with constraints arising from its origins, traditions, and relationships with First Nations, and there are many competing interests. Simple solutions while elegant are impractical, since every change pits those who benefit against those who suffer the costs of the benefits. Our democracy is more of a beauty pageant where popularity prevails and competence is seldom valued.
While Canada might benefit from a sensible tax regime, leaders who prefer power to progress will prevail and little change is possible. The travesty that results is made clear by my earlier article comparing Canada to Norway where it is evident that by simply developing our massive resources Canadians could live in a country without income taxes and with enough resource income to support social programs even the most aggressive Liberals can only achieve in their dreams.
The current trend towards a more authoritarian socialism under a Liberal government is a risk Canadians choose to suffer through the ballot box but the real risk to our children’s futures is stupidity. There seems to be no shortage.
I have used 2009 data since it is readily available and current data is not.