Nothing is certain except for death and taxes. Complaining about taxes is a national pastime for a lot of Canadians. I haven’t met one person who doesn’t think we’re being gouged by the taxman. There’s no denying we pay a lot of taxes, but how much do taxes account for of our overall spending?
The average Canadian family spends more on taxes than on food, shelter and clothing together, finds a new report from the Fraser Institute. The think-tank found in 2013, while the average Canadian family earned $77,381, they paid $32,369 in taxes – that adds up to a whopping 41.8 per cent of income! Meanwhile, we only spent 36.1 per cent on necessities like food, shelter and clothing.
This may come to you as a shock, as a lot of people believe their mortgage or rent is their biggest expense. This wasn’t always the case many years ago. In 1961, the average family only spent 33.5 per cent of income on taxes, while spending 56.5 per cent on food, shelter and clothing.
Here are the most common types of taxes we pay.
Income Taxes
When we think of taxes, income tax is what most likely comes to mind first. The amount of income taxes you pay depends on where you live. In Ontario, where I live, the combined federal and provincial marginal tax rate (the tax rate on your last dollar of taxable income) is 31.15 per cent on taxable income over $43,953 up to $70,651. You can find out your province’s marginal tax rate on TaxTips.ca.
Sales Tax
Similar to other industrialized countries, Canada has a VAT (value-added tax). A VAT is a form of consumption tax. While some products like most groceries are except from VAT tax, you’ll pay VAT tax on everything from fast food to consumer electronics. Visit TaxTips.ca for a full list of products and services that are taxable.
Property Taxes
Property taxes are the lifeblood of the communities in which we live. Property taxes pay for roads, schools, snow plowing and more. The amount of property taxes you pay depends on the municipality in which you live. Although Toronto has one of the highest cost of livings in Canada, it has relatively low property taxes compared to surrounding municipalities.
Your property taxes depend on the assessment value of your property. The good news is you can always appeal your assessment and lower your property taxes. My property taxes for 2014 totaled $2,878.
Land Transfer Tax
When you purchase real estate, you’ll more than likely have to pay land transfer tax. There are two types of land transfer tax: provincial and municipal. Each province has its own way of calculating land transfer tax, but it’s typically based on the value of your property – the higher the value, the higher the dollar amount of tax you’ll pay. First-time homebuyers are often given a full or partial refund on land transfer tax.
Toronto became the first municipality in Canada to introduce a municipal land transfer tax. Buying a home in Toronto is even more expensive, as homebuyers must pay two land transfer taxes. Even as a first-time homebuyer, I still ended up paying land transfer taxes of $3,475 when I purchased my house in August 2012. RateHub.ca has an excellent land transfer tax calculator.
Other Taxes
The taxes don’t end there! Sometimes taxes are hidden in the price of good and services. Gas, tobacco and alcohol are just a few products where taxes are already included in the price tag. Although we don’t pay taxes on lottery winnings like Americans, we pay probate when we pass away.
Do you think we pay too many taxes? Do you think we’re getting our money’s worth?
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.