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Taking on the Ford brothers' new favourite tax study

By: Matt Elliott Metro, Metro Published on Thu May 02 2013

So when the brothers Ford started pointing to an actual study last week to justify their view that Toronto shouldn't even bother debating the topic of new taxes, tolls and fees, I took notice. This is a novel thing.

The study in question is a report by the Fraser Institute titled Taxes versus the Necessities of Life: The Canadian Consumer Tax Index. It received some press when it was released a few weeks ago, and apparently the Fords jumped on it. Rob brought up the study when delivering his epic speech at the close of the executive committee meeting where he tried to limit debate on transit taxes. Doug then used it as a central pillar of his argument in an op-ed opposing taxes he wrote for three Toronto newspapers on Friday. On Sunday, the Fords brought Fraser Institute president Niels Veldhuis on their radio show to give an overview of the report.

After all that, I got the sense that the Ford brothers really, really like this thing. So I gave it a read.

The Institute's report, which is available online, makes a few conclusions. First, it says, “the total tax bill of the average Canadian family, including all types of taxes, has increased by 1,787 per cent since 1961.” It also suggests that “taxes have grown much more rapidly than any other single expenditure for the average Canadian family” and that “the average Canadian family now spends more of its income on taxes than it does on basic necessities such as food, shelter, and clothing.”

It all sounds like scary stuff, until you consider that the big 1,787 per cent figure is calculated totally independent of inflation. The authors of the report, at least, take care to acknowledge this, including a table that puts their inflation-adjustment percentage increase at just 143.5 per cent. The report notes that “this adjustment has the effect of reducing the steepness of the index’s path over time.” No kidding. Factoring in inflation will do that.

Then there's the issue of what exactly the Fraser Institute considers a tax. For their hypothetical average family, which brought in $74,113 in 2012, they've calculated a $31,615 tax bill. This calculation includes obvious things like income tax (29.1 per cent of tax paid), sales tax (15.2 per cent), taxes related to gas and driving (2.5 per cent), and property tax. (11.4 per cent, or $3,607.) But it also includes some oddities, like $1,680 in “liquor, tobacco, amusement, and other excise taxes.” That kind of seems like a lot of smoking, drinking and gambling for the average Canadian family. But I ain't judging.

Then there's $3,302 in “profits tax”, $512 in “natural resource taxes”, $245 in “import duties” and $700 in mysterious “other taxes.” Oh yeah, and there's also a whopping $6,769 in “social security, medical, and hospital taxes.” Classifying Canadian Pension Plan contributions as a tax might seem like an odd thing to do, but that didn't stop them.

The report also tries to index the increases in the cost of clothing, shelter and food from 1961 to 2012, using those numbers to demonstrate that the average Canadian family now devotes a much greater percentage of their income to taxes than to what they call “basic necessities.” But they kind of gloss over that, according to their numbers, this has been true since 1981 — for more than 30 years.

Also, since 1961, the percentage of income their Canadian family spends on basic necessities has declined from 56 per cent to just 37 per cent of total income, while tax as a percentage has grown from 34 per cent to 43 per cent over the same period. That would seem to leave their average family with a whole whack of extra cash overall.

And, oh yeah, about that date: 1961. Why 1961?

The report doesn't really go into it. But it might have something to do with the fact that 1961 is roughly how far back you must go to start getting numbers that support the apparent thesis of the report. If you take, say, 1969 — the Institute's very next data point — as your starting point, that cuts their top line number from 1,787 per cent to 914 per cent. If you take the data back only as far as 1992, which is still a good 20 years of tax history, the supposed increase in taxes paid shrinks to 69 per cent, a number that further shrinks to nine per cent after inflation is factored in. Sounds a little less scary, doesn't it?

But even if we don't quibble with any of these choices, I've still got some questions about the methodology. The big chart in the Fraser Institute report looks like this:

But defining their “Canadian Consumer Tax Index” based on the percentage increase of total taxes paid since 1961 seems like a needlessly complicated and perhaps arbitrary way to measure things, doesn't it? Call me crazy, but I think a fairer way to look at a family's tax burden might be to look at taxes paid as a percentage of total cash income.

But that chart would look like this:

Yes, that's a decline you're seeing over the last decade. Meaning that according to the Fraser Institute's own numbers, total tax paid by their average Canadian family as a percentage of income is the same in 2012 as it was in 1974. It's also fallen about three percentage points over the last 10 years.

But that didn't make the headlines, and it's not a stat that we've heard from the Fords. I can only speculate as to why.

This post was originally published at on 2013-05-02T00:00:00.000Z

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Matt Elliott

City Hall watcher, columnist and policy wonk in Toronto.
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