June 27 is Balanced Budget Tax Freedom Day in Canada

Even though the COVID pandemic is over, most Canadian governments are continuing to increase spending rapidly and borrowing money to pay for it. In 2023, seven provinces and the federal government are projected to run budget deficits.

Why does this matter for Canadians?

Earlier, we calculated that Tax Freedom Day fell on June 19 in 2023. This is the day in the year when the average family has earned enough money to pay the taxes imposed by all three levels of government—federal, provincial and local. Put differently, if Canadians were required to pay all their taxes up front, they would have to pay each and every dollar they earned to government prior to Tax Freedom Day.

However, these calculations do not account for the implications of the budget deficits various governments will run this year. In fact, according to budget forecasts, the federal government will run a $40.1 billion deficit in 2023 while net cumulative deficits for the provinces could reach $6.9 billion.

Taxes will ultimately pay for today’s deficits, which means the combined projected federal and provincial government deficits of $47.0 billion in 2023 should be considered as deferred taxes. To illustrate this point, we’ve calculated a “Balanced Budget Tax Freedom Day” to show when Tax Freedom Day would arrive if Canadian governments had to raise taxes today to balance their budgets instead of financing spending through borrowing. That day is June 27—eight days after the original June 19 estimate—representing nearly half the year.

This “Balanced Budget Tax Freedom Day” also varies by province. Some provincial governments are in better fiscal shape than others, and the scale of provincial deficits in 2023 differs significantly. Alberta, Saskatchewan and New Brunswick are the only three provinces forecasting surpluses this year.

In contrast, British Columbia is projected to run the largest deficit ($4.2 billion) of any province in 2023. Similarly, Quebec also has one of the largest projected provincial deficits in Canada at $4.0 billion in 2023.

The combination of high taxes imposed on families and the relatively large deficit mean Quebec has the latest Balanced Budget Tax Freedom Day this year of any jurisdiction. Indeed, the average Quebec family would not earn enough money to pay its total tax bill in 2023 until July 8.

In other words, if the Trudeau and Legault governments had to raise taxes today to balance their budgets instead of financing spending with borrowing, Balanced Budget Tax Freedom Day in Quebec would arrive eight days later than the province’s standard Tax Freedom Day.

But Quebec’s not alone. Balanced Budget Tax Freedom Day is at least eight days later for six other provinces including British Columbia (12 days), Nova Scotia (10 days), Prince Edward Island (9 days), Newfoundland and Labrador (9 days), Manitoba (9 days) and Ontario (8 days). As such, the tax burden for average Canadian families is expected to rise in future years to pay for today’s deficit-spending. And Tax Freedom Day will likely occur later than June 19 in subsequent years, as future generations of Canadians foot the bill for today’s spending through tax increases.

The national Balanced Budget Tax Freedom Day falls on June 27 this year, which is only a few days before Canada Day. If Canadian governments continue to increase spending and run deficits in coming years, average families could end up working more than half the year to pay their taxes.