Math is hard: The Fraser Institute’s “Consumer Tax Index” is a mess

As surely as the seasons pass, each year the Fraser Institute reissues its paint-by-numbers “Consumer Tax Index.” As usual, the latest release tries to create the impression that taxes in Canada are out of control (taxes on the average family are supposedly up 2,112% since 1961, if you can believe it!).

This methodological mess of a study has been debunked many times by the CCPA. If you’re wondering about it, the best thing to do is read my colleague Iglika Ivanova’s numerous takedowns, which expose its errors, conceptual confusion and unrivalled tendency to simply miss the point.

You can find a sampling of the CCPA’s analysis on this issue here, here, here, here and here.

I’m not going to repeat all of those efforts, but since I recently debated the report on national talk radio, I thought I’d take a moment to share a few thoughts.

First, if you want to get an accurate picture of tax levels in Canada, you can simply look at the OECD’s comparative tax data. As it shows, taxes as a share of the economy (GDP) are lower in Canada than the vast majority of developed countries. Canadian taxes have also declined over the last three decades—the era of neoliberal tax breaks for the rich and cuts to public investment.

It is true, however, that if you go back further, taxes are higher today than they were in 1961, the Fraser Institute’s favourite starting year. Remember 1961? We didn’t have universal healthcare, the Canada Pension Plan, paid parental leave, or a good chunk of our national infrastructure. As Iglika put it, “Think about all the roads and bridges we have built since 1961, all the schools, colleges and universities that were opened or expanded. Of course taxes are higher than they were in 1961!”

What the Fraser Institute doesn’t seem to understand is that if we hadn’t joined together to make investments in areas like health care, pensions and education, we’d still be paying for them privately—or going without if we couldn’t afford them. The privatized versions of these services would not only be less equitable, but also more expensive. As I’ve argued in other work, when government programs and services shrink—as has happened in much of Canada in recent decades—it comes at a huge economic and social cost.

When you ask them, Canadians are actually willing to chip in themselves for better services. Folks do sometimes bristle at taxes, but the problem is not with taxes per se—rather it’s with the erosion of tax fairness that has skewed the system in favour of large corporations and the wealthy.

Beyond these bigger picture matters, the list of methodological problems with the “Consumer Tax Index” is long indeed. I’ll just recap a few of the doozies:

• When assessing the level of taxation families pay, the Fraser Institute brazenly lumps all taxes together, including corporate taxes. But individuals and families don’t pay corporate taxes. Nevertheless, the Fraser Institute adds these to the tally, skewing their results.
• The Fraser Institute also pretends inequality doesn’t exist. Instead of modelling a typical family, the Institute takes the shortcut of simply adding up all taxes paid in Canada, dividing it by their (also flawed) measure of cash income, and the calling this the tax rate on the “average family.” This conveniently assumes away the very unequal distribution of income in Canada.
• The Fraser Institute ignores the fact that payroll deductions like CPP and EI are not ordinary taxes going into general revenue, but are tied to the payer as part of pensions and insurance plans, which are paid back in cash during retirement and periods of unemployment.
• They ignore that much of what they count as the tax bill flows immediately back into Canadians’ pockets as cash transfers like the Canada Child Benefit and Old Age Security.

Fundamentally, the Consumer Tax Index is just not a serious piece of analysis. You can tell because the methodology hasn’t really changed in 10 years, despite being repeatedly debunked. The good news is that the report seems to be getting less and less attention each year, perhaps a reflection of the broadening awareness of the damage wrought by austerity and tax cuts around the developed world, and growing evidence of an appetite for a bold collective action.

If you’re wanting to dig deeper, check out the links above for some more detailed analyses.

Topics: Taxes