Three Perspectives on Our Higher Cost of Living

With higher inflation, the increasing cost of living has been top of mind for many Canadians. While there has been good news on the inflation front given continuing signs of easing, here are three perspectives on our rising cost pressures.

1. Today, less of our paycheques go to necessities.

Despite a substantial rise in grocery costs, it may be surprising that the proportion of income spent on necessities has declined substantially over time. In 1961, Canadians spent 33.9 percent of family income on food and clothing; today, this has declined to just 14.6 percent. This is largely because incomes have grown faster.

2. Which expenditure has grown the most? Taxes.

According to the Canadian Consumer Tax Index, the average Canadian family spends 45.3 percent of income on total taxes, compared to 35.6 percent on necessities. Since 1961, there has been a 2,778 percent rise in the taxes we pay, outpacing increases in the Consumer Price Index (that measures changes in prices), which has increased by 863 percent.

3. Higher-income taxpayers shoulder the heaviest tax burden.

When comparing the share of taxes paid to the share of income, the highest income earners pay the most tax. The top 20 percent of income earners (with family income over $243,000) pay 61.9 percent of personal income taxes (PIT) yet represent 45.7 percent of total income. Every other income group pays a smaller share of PIT.

1.&2.https://www.fraserinstitute.org/studies/taxes-versus-necessities-of-life-canadianconsumer-tax-index-2023-edition;
3.https://www.fraserinstitute.org/studies/measuringprogressivity-in-canadas-tax-system-2023

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