Taxes - should there be a limit?

[Spidey]

Canadians now use nearly 42 per cent of their average $69,175 household income to pay taxes -- income, sales, property, liquor, tobacco -- compared to about a third of their $5,000 income in 1961.

Niels Veldhuis, the study's co-author, said the tax take amounted to $28,878 in 2009, compared with $1,675 in 1961.

"The increase in the tax bill outstrips the increase in all other expenditures," the director of fiscal studies at the Fraser Institute said.

The report by the fiscally conservative think-tank showed the total tax bill of the average Canadian family has increased 1,624 per cent since 1961, while expenditures on housing rose 1,198 per cent, food by 559 per cent and clothing by 526 per cent.

Read more: http://www.calgaryherald.com/busines...#ixzz0ldlO6yon

The average family pays 42% of income in taxes. Where do you figure the limit for maximum total taxes should be? Is 42% about right? Should it be 50%? Even higher? Or should it be less?

[MoneyGal]

I have to read the study to really comment (the linked article didn't provide enough info for me) but I gotta tell you, a household that is spending 42% of its income on taxes needs to spend less.

[brad]

The average family pays 42% of income in taxes. Where do you figure the limit for maximum total taxes should be? Is 42% about right? Should it be 50%? Even higher? Or should it be less?

I don't see how you can limit it, because it depends on people's consumption. We already have a system of tax brackets in place to ensure that lower-income people pay proportionately less income tax, but beyond income and property taxes, the amount you pay in tax depends on your spending habits.

Besides, establishing a limit would provide an incentive for overconsumption: hey, if I purchase $20,000 worth of food, clothing, and non-essentialls, I can start buying stuff tax-free!

Apart from property tax, we all have a certain degree of control over how much tax we pay every year. I'm in the highest marginal income tax bracket in Canada, and yet according to the tax statement I just got from my accountant, my average income tax rate (tax paid divided by income) was 20%. I can live with that. I didn't do anything special to reduce my tax burden except contribute to my RRSP and make some charitable donations. Property taxes were a tiny additional percentage. For the rest of the taxes I pay (sales tax, alcohol tax), I have a lot of control based on how frugal I choose to be.

[Spidey]

I have to read the study to really comment (the linked article didn't provide enough info for me) but I gotta tell you, a household that is spending 42% of its income on taxes needs to spend less.

It probably wouldn't be very hard to get to the 42% level without being an extremely heavy spender. Income taxes alone probably account for 30-35%. Then property taxes probably add another 5-7%. Throw in gas taxes everytime they fill up their car. Add on sin taxes if the couple enjoys the odd glass of beer or wine. Then there are user-fee type taxes such as airport tax if the couple has the money to travel. And top it all off with the GST/HST.

[Sampson]

With essential public services like healthcare grossly underfunded (or one could argue, gross inefficient), I don't think caps on taxation are a good thing.

I don't want to start a healthcare debate, but looking at many european nations, our taxation rates aren't really that high - heck even the mecca of free market capitalism has moved towards government provided healthcare.

Back to the point, even if our taxation rates rose to 70% - if we expect the government to provide set services, then we got to pay, the actual % is somewhat meaningless.

[MoneyGal]

Only a teeny, tiny fragment of the population would actually pay 35% (or even 30%) of their income in income taxes -- that would be people who earn in excess of about $130K and who make no offsetting tax deductions (i.e., RRSP contributions, charitable donations, etc.).

Here's a calculator from Ernst and Young to make my point. I can only get income tax rates of 35% by putting in taxable income of $150K in most provinces.

[Spidey]

Yes. You're right. The highest is about 28% in Quebec (it feels like more). I suspect that things like sales taxes on vehicles and other large purchases account for much of the difference. Perhaps some of it is due to over-spending.

[CuriousReader]

Back to the point, even if our taxation rates rose to 70% - if we expect the government to provide set services, then we got to pay, the actual % is somewhat meaningless.

I would like to see a study where they breakdown where every cents of tax go ... something like ... x% MPs salary, y% MPs allowable expenses, z% unions salary, m% overtime salary for union members, n% EI payout, p% welfare payout ... etc, of course the breakdown have to be even more detailed eg. dont clump unions together.

It's probably impossible to have such accountability, but if it can be done, I am sure we can see A LOT of places where more efficiencies can be applied. It's not about cutting back services, it's about cutting back wasteful spending.

[the-royal-mail]

1. What about the Health Care Premium, which added about $700 to your annual tax bill?
2. Annual property taxes in the GTA were costing me $1700 (for a small condo in a tower)
3. Fuel taxes, who knows.
4. GST and PST add about 15% to my purchases of most things, essential or not.
5. red light and speed cameras, fines, speeding tickets, yes yes I know everyone will tell me not to speed (I rarely do) but it's well documented that these are merely speed traps and have more to do with taxation rather than safety.
6. Numerous new city "fees" for things like too many garbage bags, using a city pool, toll routes (think of hwy 407)
7. airport and other vehicle registration taxes and fees
8. taxes and fees whenever you get something shipped across the border to you
9. ever-increasing transit fares
10. ever-increasing cigarette and booze taxes
11. more and more casinos and lottery tickets all the time
12+. fill in the blank

As you can see, the % of tax we pay is a lot more than just our income tax rate and really has little to do with poor money management. We're being eaten alive by taxes (now called "fees") in this country.

[MoneyGal]

I personally am not being eaten alive by taxes on fuel, cigarettes, lottery tickets, casinos, the purchase of new cars, having things shipped to me, garbage bag tag fees, airport taxes and fees, or toll roads. Or even income taxes, for that matter.

I do take the TTC but relate to the fare as a (tax-creditable) fee for service, not a tax. And once my knee is healed again, I'll be back on my bike - I am a year-round cyclist to work.

This is one of those no-winnable arguments (and I'm not really arguing with you, TRM!). My point, though, is that consumption taxes can be avoided - by consuming less. It doesn't make sense to me to complain about a tax (or something else) which, it seems to me, can be easily avoided. Or, if it can't be avoided, should be factored into your decisions - and then not viewed as a source of lingering complaint.

Perhaps I'm feeling optimistic and generous. I just had knee surgery from a world-class surgeon (he is the Raptors surgeon, as he will tell anyone who gets within a few feet of him), at an estimated cost of $25K (the woman who was in the bed next to me, and who had the same surgery, is a physiotherapist who often consults on similar surgeries carried out in the U.S.) at no charge to me. Now, I've paid more than $25K in taxes over my lifetime, for sure! but I received a direct and beneficial result for those taxes paid, and I am grateful.