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Analysis

Fraser Institute’s ‘Tax Freedom Day’ Wildly Exaggerates the Tax Bill of the ‘Average Canadian Family’

The Fraser Institute’s misleading ‘Tax Freedom Day’ report overstates the typical Canadian family’s tax bill by tens of thousands of dollars

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PressProgress is an award-winning non-profit news organization that uncovers and unpacks the news through original investigative and explanatory journalism.
Learn more about our journalistic standards

The Fraser Institute’s latest “Tax Freedom Day” report relies on misleading numbers that exaggerate how much money the “average Canadian family” is paying in taxes to the tune of tens of thousands of dollars.

Every year, the Fraser Institute releases its “Tax Freedom Day” report that makes exaggerated claims about how much the “average Canadian family” pays in taxes.

This year, the right-wing think tank misleadingly claims 45.2% of the income of an “average Canadian family” is swallowed up by taxes – that’s $58,567 paid in taxes on the $129,589 earned by the “average Canadian family” every year, to be precise.

As usual, the Fraser Institute’s misleading “Tax Freedom Day” report was promoted by Postmedia and local radio stations.

Using the Institute’s mysterious “Canadian Tax Simulator,” the right-wing think tank typically exaggerates the tax bill of the “average Canadian family.” One way it does this is by suggesting taxes paid by employers and businesses (including corporate taxes, natural resource fees, and import duties) are directly covered by individuals.

The Fraser Institute itself admits income tax only accounts for one-third of its entire calculation.

The other way it does this is by exaggerating the income of the typical Canadian family by relying on the “average” income of all Canadian families rather than the median income. The “average” skews higher thanks to ultra-wealthy families.

This year, the Fraser Institute claimed the “average Canadian family” earned a cash income of $129,589 in 2020. That is over 50% higher than the 2020 median income calculated by Statistics Canada – $84,200.

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Canadians For Tax Fairness economist D.T. Cochrane said the Fraser Institute distorts their calculations by tacking on taxes paid by corporations.

“There are numerous problems with the Fraser Institute’s ‘Tax Freedom Day’,” Cochrane told PressProgress. “As usual, their analysis is meaningless because of their unequal treatment of business income and business taxes.”

“They include ‘profit taxes’ to come up with their total tax bill. They are claiming that the taxes paid by businesses are ultimately paid by families. I suspect several other line items are also allocating business’ taxes to the taxes supposedly paid by families. However, they do not distribute business income to families.”

Andrew Jackson, a Carleton University political economy professor and a senior policy adviser to the Broadbent Institute, agrees with that assessment.

“The methodology behind so called ‘Tax Freedom Day’ has been repeatedly debunked by independent experts but to no avail,” Jackson told PressProgress.

The Fraser Institute’s tax experts did not respond to questions from PressProgress about their methodology in calculating the tax bill of an “average Canadian family.”

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According to a 2017 Broadbent Institute report by economists Richard Shillington and Robin Shaban debunking the Fraser Institute’s Tax Freedom Day report, most middle-income Canadian families typically pay an effective income tax rate that’s generally between “10% to 19%” – significantly lower than the 45% suggested by the Fraser Institute.

Currently, the highest income tax bracket, for those earning over $216,511 per year, is only 33%.

Another earlier report in 2005 from Canadian Centre For Policy Alternatives underlined just “how silly the Fraser Institute’s idea of the average family is.”

“Another distortion is the Institute’s use of the concept of the ‘average’ family as opposed to the ‘median’ family,” the CCPA noted. “since most families think they are about average, this was meant to suggest that most families paid about one-half of their income in taxes.”

“If the typical Canadian family is assumed to be the median family — the family at the mid-point in the income scale, where 50% of the families are richer and 50% poorer — obviously ‘Tax Freedom Day’ would come much sooner than the day suggested by the Institute.”

 


 

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Mitchell Thompson
Ontario Reporter
Mitchell Thompson is PressProgress’ Ontario reporter. His reporting has a special focus on workers and communities, and public services and privatization, and public accountability.

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