I mostly support democratic socialism – a system in which an elected government ensures all people have their basic needs met, regardless of income and ability. That is “my” socialism.
Officially, socialism means that all members of a society collectively control national resources, how they’re accessed and how they’re used. Sounds utopian, right? In practice, the work is shifted onto the government for more efficient administration.
This can go very well (Netherlands, Finland), very badly (North Korea, China) or somewhere in between (France, Portugal).
In countries with weak social programs, citizens often fear giving the government too much power and giving up personal choices.
I have long believed that Canada has a good range of social programs for an acceptable tax rate. I decided to test my beliefs by figuring out how much tax I actually pay.
I have a lot of payroll deductions, and my take-home pay is just 60% of my gross pay. However, I am not paying anywhere near 40% in taxes!
It is actually 21.82% plus a couple of required costs:
- 21.82% taxes (federal and provincial)
- 4.31% mandatory government benefits (employment insurance and Canada Pension Plan – only contributors are eligible for them)
- Total 26.13%
I also pay property tax which pays for municipal services. Obviously, this is based on the value of my house. If I were renting, an unknown portion of my rent would be helping the landlord pay for the property tax on the building. My property tax is indexed to the rise in value of my house, which has been modest and steady, so there have been no shocks. This tax is currently 2.82% of my annual salary.
Next, there is sales tax, aka GST. If I take my after-tax income and put away my savings, I am left with my spendable money. I spend all of it (because savings are taken off the top). In Canada we pay no sales tax on basic groceries, heath and dental costs (except OTC products), insurance, charitable donations, banking and financial fees, household water, or cash gifts (giving or receiving). There are untaxed items I don’t need: rent, daycare, diapers, children’s clothes and shoes, menstrual products, prescriptions. We pay reduced tax rates on household electricity, heating oil and books. Everything else incurs our provincial blended tax rate of 15%: such as cell phone service, haircuts, household repairs, restaurant meals, and all “things.”
Based on the above, I paid 3.24% of my gross income in sales tax last year.
My entire tax picture for a year is:
- 21.82% income tax (based on income)
- 4.31% EI & CPP (based on income) – not really taxes, but mandatory govt services
- 2.82% property tax (based on house value)
- 3.24% sales tax (based on spending)
- Total 32.19%
Another 14.28% goes to retirement and benefits so I am left with 53.53% of my salary to spend or save. I am fine with that part because my future pension situation is above average.
What do I get for giving the government 32.19% of my salary?
Federal Programs, Services and Benefits
- Federal law and human rights
- Consular Services
- International Relations (including trade agreements)
- Regulation (environment, banking, etc.)
- The Mint
- Deposit insurance and mortgage insurance
- Scientific research
- Support for arts, heritage and sport
- Mail (Canada Post)
- Old Age Pension
- Canada Pension (CPP)
- Employment Insurance
Provincial Programs, Services and Benefits
- Education (legislation, establishment and funding of public programs, funding partnerships with higher education, curricula, school construction)
- Health care and hospital care; dental care for children
- Social services including income support, disability support and foster care
- Local environment, agriculture, fisheries and forestry – policy and support
- Economic development including investment, grants and subsidies
- Justice (courts, prisons, privacy)
- Energy & utilities
- Emergency management
- 911 service
Municipal Programs, Services and Benefits
- Police and fire services
- Recreation, parks, playgrounds and sports fields
- Streets, sidewalks, street lighting and snow clearing
- Garbage and recycling
- Water and sewer services
- Public transit
- Additional funding for local school programs (music, art, library, social work)
- Bylaw enforcement
- Planning and zoning
- Permits and licenses
I have benefited, currently benefit or will benefit from almost all these services. For the few that don’t impact me directly, I am immensely grateful they are available, either free or subsidized (via tax dollars) for those who need them. There is not one thing I would strike off any of those lists.
Lower income residents in Canada theoretically have access to income support, disability support, pharmacare, a guaranteed income supplement for seniors, a partial rebate of GST paid, tax credits, child benefits, job training and public housing. I believe far too many people fall through the cracks. With these programs, too many people still exist far below the poverty line. For example, a single man in my area who has fallen on hard times will struggle to qualify for income support and GST rebates, and will bring in only $7583 a year from those combined programs, or $632/month. It is just about possible to sublet one bedroom within an apartment for $550/month. How is that person going to eat or prepare for the job market?
I’ve often thought about how much more I would pay for a better level of services, such as free prescriptions and dental care for all ages, and a guaranteed basic income for all. I want these things to happen. At my income level, I would willingly pay 10-15% more in total taxes. Maybe I could be talked into more! It would be indescribable to wake up one day and know that all of my fellow citizens were cared for.
Do you know how much tax you pay and what you get for it?
How would you like taxation and benefits to change – either for you or for others?