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Taxes keep on coming

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(Special) - Monday June 9 this year passed by without much fanfare, much like any other day of the year. If you're like most Canadians you probably didn't know what was special about June 9.

June 9 was tax freedom day. This is the day calculated by the Frasier Institute when the average Canadian family has earned enough money to pay all the taxes imposed on it by the three levels of government in the country -- federal, provincial and local.

If Canadians were required to pay all of their taxes up front they would have to pay each and every dollar they earned to government prior to tax freedom day.

In 2014, Canadians started working for themselves on June 9. Canadians must work for themselves until June 8 to pay the total tax bill imposed on them by all levels of government. From June 9 to the end of the year taxpayers can use the income they earn as they please.

This year's tax freedom day was one day later than last year when it fell on June 8. The latest tax freedom day was in 2000 when it fell on June 24, almost two months later than in 1961, the earliest year for which the calculation has been made.

Tax freedom day may or may not be a reason for celebration because, although it signifies the day when your tax indebtedness to governments is over, it also clearly shows that you have to work almost half of the year to pay off your government taxes.

In 2014, for example, the average Canadian family will earn $99,841 in income and pay a total of $43,435 in taxes, or 43.5 per cent.

Tax freedom day is determined by the ratio of total taxes to income for average Canadian families. When the economy slows and incomes either stagnate or decline, the tax burden on those families tends to decrease to a greater extent, primarily because of the progressivity of the Canadian tax system. Progressivity means that as you earn more income you pay proportionately more income and vice versa.

Most Canadians have little difficulty knowing how much income tax they pay - they can quickly look at their income tax return or their pay stub. But it's nearly impossible for the average Canadian to really know how much total tax they pay because there are a host of taxes that are not so obvious.

Sales taxes like the HST are painfully obvious, but to get a total amount you have to track each and every purchase over the course of a year. And how many people do that?

Also, there is a further class of taxes which most people are not aware of and which are built into the prices of goods and services.

"The most notable of these 'hidden taxes' are import duties, fuel taxes, excise taxes on tobacco and alcohol, and amusement taxes," the Institute says. "Most Canadians are unaware that they pay their employer's portion of payroll taxes such as Employment Insurance and Canada Pension Plan premiums and other taxes levied on businesses. Although businesses pay these taxes directly, the cost of business taxation is ultimately passed onto ordinary Canadians."

Tax freedom day varies by province based on provincial taxes levied. The earliest in 2014 was May 23 in Alberta while the latest was June 22 in Newfoundland and Labrador.

The Institute notes that tax freedom day is not intended to measure the benefits that Canadians receive from governments in return for their taxes. This is a question each person individually can only answer.

No matter how you look at it, Canadians pay a lot in taxes whether they know it or not and whether they benefit from them or not.

Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.

Copyright 2014 Talbot Boggs

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