Income Tax Differences: Canada and the US

Canadians have become almost numb to the issue of taxation having been bombarded with media reports decrying the amount of tax that Canadians pay and the thought that Canada is one of the most heavily taxed nations on Earth. Setting aside the vitriol and hyperbole for a moment, though, we have to question whether the reports are actually true.  How significantly are Canadians taxed relative to similar nations, such as its neighbour to the South?

A recent report by the Fraser Institute[1] gave some indication of the true level of cumulative taxation in Canada.  Cumulative taxation is an attempt to consolidate all of the taxes that people will ordinarily pay at various levels and consider the total figure rather than considering each of them separately.  By doing so, we are better able to directly compare the levels of total taxation in different countries.

The Fraser Institute report estimates the amount of income tax, property tax, consumption/sales tax, embedded tax, and other taxes and duties that are paid by the average family in Canada. The report finds that the average family in 2015 earned an income of ,593 and paid total taxes of ,154 on that income.  By this math, 42.4% of the average Canadian family’s income is paid to various levels of tax throughout the year.

By comparison, in the United States, the average family earned income of ,851 and paid approximately ,000 in cumulative taxes throughout the year. The result is that approximately 27% of the average family income is allocated to the payment of taxes.[2]

The take-away of these reports is that Canadians pay more of their incomes, on a proportionate basis, to taxation than their American cousins, and the figures are quantifiable and significant. For further information or to discuss ways to enrich your cross-border lifestyle, please do not hesitate to contact us or call 1-800-678-5007.




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