The question of not only how much, but where your taxes actually go, looms
large for Canadians this weekend: Monday is the filing deadline, and on Tuesday,
in the new federal budget, we will finally see what the Tories will do on the
issue of income tax cuts.
FEDERAL TAXES
For the fiscal year ending March 31, 2005, the government collected
$198.4-billion in taxes and other revenues. The bulk of this money was raised
from personal income tax collections, representing 45% of all federal revenues.
GST and corporate income taxes each accounted for another 15% of federal
revenues (30% total). Other revenues and taxes, including Employment Insurance
premiums, accounted for the remaining 25%.
Where does this revenue go? Fifty-five cents on each dollar goes to transfer
payments: transfers to persons (through programs like Old Age Security and the
Guaranteed Income Supplement), transfers to provinces (to help fund health
programs and post-secondary education) and other grants and contributions for
specific public policy purposes (transfers to First Nations, farmers, etc.)
Of the remaining 45 cents of each tax dollar, 27 cents goes to fund the
operating costs of the government, including funding for defence, public safety
and crown corporations. Seventeen cents goes to fund interest on Canada's debt,
and just under 1 cents collected last year was used to reduce the public debt.
CPP AND EI
Canada Pension Plan contributions and Employment Insurance premiums, are both
deducted from pay at source by an employer. The maximum CPP contribution per
employee for 2005 was $1,861.20, based on pensionable earnings of $41,100.
This money is used to fund your retirement pension, generally at age 65. For
example, if you were eligible for the maximum pension this year, you would
collect $844.58 per month or $10,135 for the year.
The maximum EI contribution for employees in 2005 was $760.50, based on
maximum insurable earnings of $39,000. The EI premiums collected by the federal
government totaled slightly more than $17-billion last year, representing 8.7%
of the government's total revenues. Note that these premiums are treated as part
of general government revenues, used to fund the transfers and expenditures
discussed above.
PROVINCIAL TAXES
Provincial taxes are the biggest variant among Canadians since provincial tax
rates range widely. Each province uses a different set of brackets, indexed to
inflation using provincial indexation factors, and applies different rates. As
well, four provinces and one territory (Newfoundland and Labrador, Nova Scotia,
Prince Edward Island, Ontario and the Yukon) have surtaxes.
An Ontario taxpayer, for example, would not only pay provincial tax, but
would also pay two levels of surtaxes along with an annual "Ontario Health
Premium," which, ironically, would still have to be paid even if you don't
qualify under Ontario's health plan. Residents of Alberta and British Columbia
pay monthly health premiums.
The Ontario government estimates to collect about $2.6-billion, or 3% of its
total revenue, for 2006-2007 as a result of this premium, which will be used to
increase the number of doctors and nurses in the province, among other things.
Where do provincial revenues go? The bulk goes to fund healthcare, with the
balance used to fund public school education, colleges and universities, the
provincial justice sector, children's and social services, as well as the
operation of the provincial government itself.
GRAPHIC: Graphic/Diagram: Where your taxes go.: (See print copy for complete
graphic/diagram.)