I just did my taxes this weekend, and I’m wracked with guilt.
Personally, I’ve never found completing my taxes particularly onerous. It takes me a few hours — no big deal. I’m paid well (and well above the average). I’ve never had to hire an accountant, as I’m not doing anything fancy. I’m only availing myself of a few basic deductions — RRSPs, the child care deduction, and charitable deductions.
But when I’m done, I like to do the following exercise: first, I go back and look at my total income (not my “net” or “taxable” income, but rather my gross income). Then I look at what I actually have to pay in total federal and provincial income taxes (not what was deducted from my paycheque, but rather what I will actually have to pay after all my deductions and my tax refund). Then, using these two figures, I calculate the total effective income tax rate I pay.
And what do you think that is? Go ahead, take a guess… 20%? 25%? 30%? More? Alright, I’ll tell you — 13.38%! And all I can think is “What a #?!@#*?&@#!! steal!” Here I am making roughly two and a half times the median income, and I’m getting all these public services, and I’m only paying 13.38%! In fact, if I isolate only my provincial income taxes, the total effective income tax rate comes to a paltry 3.46%. Ridiculous. What are these tax cutting maniacs complaining about?
Now granted, we pay other taxes too: payroll, sales, property, MSP, etc. When these get included, the tax regime ends up a whole lot less progressive, and the total bill increases. But, as the CCPA’s Marc Lee found in a major 2007 study entitled Eroding Tax Fairness, even when these all these taxes are included, most people are paying closer to 35% of their income in total taxes, and no income group is paying more than 40% (indeed, the very wealthy pay a lower overall rate than the poor and middle class). So why are so many people under the mistaken impression that they are paying over 50% of their income in taxes? Well, because they are told this so relentlessly in the mainstream media. But they aren’t.
I encourage people to do the same exercise I did when they complete their taxes. The results will surprise you. And when you stand back and look at what we pay in taxes, set against the public goods and services we provide to one another in exchange, one is hard-pressed not to conclude that it’s a pretty great deal. In fact, maybe it’s time to increase our taxes.