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?
I am a teacher in Ontario and my take home salary percentage is similar to yours. There are years that I have paid over $15000 just in income tax (not counting the other taxes you mentioned). I am ok with that. I find it interesting that I hear people complain of the taxes they pay, when I know they are paying much less than I am! Like you, I would rather pay and be sure that others are taken care of. I do have family and friends in the US, who seem to “enjoy” a lower tax rate. By the time they have paid their health insurance bills though, I would imagine our “tax” rates are similar. This virus has reminded me how precarious it is for people whose health insurance is tied to their employment. That frightens me.
I would be fine with paying more in taxes if it meant greater services. I am also ok with income based services. People who need more, can have more. That’s the kind of country I wish to live in.
Hi Christy, Thanks for stopping by! I lived in the US for 8 years where tax rates were lower but I had to pay for more services myself. I found the social inequality really hard to live with, especially health care and the varying quality of public schools from one town to the next. We have a long way to go in Canada, but in general, people are accustomed to a higher tax rate and more social services.
It is funny, as an American I don’t take that much more of a percentage home (still under 60% take home).
For that I do pay into a retirement (but it doesn’t include the sales tax as well). The single biggest thing I pay into is my medical insurance… which leaves me with huge holes of coverage I have to pay for (and could get bankrupted from), I don’t have half the other social safety nets, and yet my fellow citizens scream how much better we are then Canada…
They are idiots.
Also, if I wasn’t too old to emigrate I would love to live in Canada and pay taxes to Canada. Also it would be nice to be in a country I could be proud of.
Nice to hear from you! I will never forget – when I lived in Massachusetts – I checked how much it could cost if I had to pay for the health coverage I received from my employer, through the COBRA program. (It allowed you to continue your health coverage if you left your job). It was over $950/month and that was 20 years ago! Incomprehensible!
As an American who is in a fairly high tax bracket, I find it reprehensible that my tax dollars aren’t paying for more services to help the vulnerable. We pay a LOT, I’d like to see the result of that being more safety nets for people who need them. And goodness, at a bare minimum, we really need everyone to have good healthcare, it shouldn’t be the luck of the employer draw.
Health care tied to employment makes me so sad! – leaving those with the least means and the worst health to fend for themselves. Employers can always maximize profits by minimizing benefits. Hence the role of good government.
Don’t know how much I pay in tax. Like you I am happy to pay it, knowing we have a social security safety net and social services. It’s the social contract and cost of living in a free-ish, democratic, civilised, advanced nation.
We are like-minded on this.
I am from New Zealand and we pay a similar rate of overall tax here. Benefit for a single person here is slightly more- approx C$ 925 for a month. What makes a real difference here is that if he/she doesn’t have a house – they get an accommodation allowance. It differs according to the area they live although still a bit too low in a big city. If the benefit is quite low as you mention, they maybe also getting some support for accommodation in Canada?
You probably don’t have to pay so much additional tax like you mention, to increase the benefit. What should be done is to increase the tax for those on high income slabs like over $100,000 and $200,000, who can better afford some extra tax.
What I find inexcusable is that in most developed countries, they have been reducing tax rates for those most able to afford a little more payment and reducing benefits for those who really need some extra money!
Time for a change!
Hi, thanks for visiting! I do find it distressing that the income support amount is so low and housing has to be paid from it. That requires recipients to have multiple room mates. According to my local income support site, it is meant to be a “support” and not supposed to cover all costs. But of course the most destitute have no other income sources, when they are least well. I agree that higher income individuals should pay a higher rate. For example, at the $97,000 mark, the top federal tax rate is 26%, at $150K it goes to 29% and over $214K it is the top rate of 33%. And of course the business tax rate is kept low to encourage investment.