Taxes Consume 42% of Average Canadian Family’s Income, Outpacing Housing and Living Costs: Study

A woman reviews her receipts in an undated file photo. The average Canadian family spent 42.3 percent of their income on taxes in 2024, according to a new study. Grace Cary/Moment/Getty Images

The average Canadian household devoted more than 40 percent of its income to taxes last year, exceeding the combined costs of housing, food, and clothing, according to a newly released report.

A Canadian family with a combined income of $114,289 paid $48,306 in taxes in 2024, accounting for 42.3 percent of their income, a study published by the Fraser Institute suggests. That figure is 6.8 percent more than the 35.5 percent of income that Canadians designated for housing, food, and clothing combined.

“At a time when the cost of living is top of mind across the country, taxes remain the largest household expense for Canadian families,” said report co-author and Fraser Institute director of fiscal studies Jake Fuss.

This represents a significant change from six decades ago in 1961, when the typical Canadian household spent 33.5 percent of their earnings on taxes while a much larger portion, 56.5 percent, was spent on housing, food, and clothing.

The rate of tax increases has outpaced all other single expenditures for the average family. From 1961 onwards, the total tax obligation of the average Canadian family has risen by 2,784 percent, far exceeding the growth in housing costs at 2,129 percent, food at 927 percent, and clothing at 460 percent.

The tax bill has experienced a notable increase of 2,784 percent, significantly surpassing the 925 percent rise in the Consumer Price Index (CPI). The CPI reflects the average costs incurred by consumers for essentials such as food, shelter, clothing, transportation, health and personal care, education, and various other goods and services.

Tax Breakdown

The overall tax obligation for Canadians encompasses both “visible and hidden” taxes remitted to federal, provincial, and local governments, such as income taxes, payroll taxes, and sales taxes, the report said.

“The Canadian tax system is complex and there is no single number that can give us a complete idea of who pays how much,” the authors wrote. “In order to calculate the total tax bill of the average Canadian family, we add up all the various taxes that the family pays to federal, provincial, and local governments.”

Income taxes represented the largest expense, accounting for 31.2 percent of an average family’s tax expenditures. That equals $15,085 paid on an annual income of $114,289.

Next on the list were payroll taxes and health taxes, representing 21.4 percent or $10,319 of the tax expenses incurred by an average family.

Sales taxes represent 14.1 percent, totalling $6,812; profit taxes constitute 13.5 percent, amounting to $6,534; and property taxes make up 8.5 percent, at $4,111.

Alcohol, tobacco, entertainment, and excise taxes make up 3.4 percent at $1,640, fuel and vehicle taxes constitute 3 percent at $1,470, and natural resources taxes account for 1.4 percent at $657. Other taxes total 2.9 percent at $1,403.

“Average Canadians also pay the taxes levied on businesses,” the authors said. “Although businesses pay these taxes directly, the cost of business taxation is ultimately passed onto ordinary Canadians.”

Taxes as a percentage of income surged in Canada in the 1980s, coming in at nearly 41 percent by 1981 and have hovered in that range ever since.

Canadians’ salaries have also grown significantly over the years from $27,980 in 1981 when an average family forked over $11,429 in taxes to the more than $114,000 last year when taxes exceeded $48,000 annually.

The change in income over the years is just one reason for the dollar amount growth in taxes, the report said. Government spending also plays a large role in taxes.

“The federal and provincial governments have reverted to deficits to finance their expenditures in recent years, especially during and coming out of the COVID-19 pandemic,” the author said. “Of course, these deficits must one day be paid for by taxes. Deficits should therefore be considered as deferred taxation.”