Canadians pay so much more in taxes than Americans – and for what?

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Gus Carlson is a U.S.-based columnist for The Globe and Mail

Ask people who Dallas Hostetler is and most won’t have the foggiest idea. Some might guess he’s an NFL quarterback or a German brewmeister.

In fact, Mr. Hostetler is the American businessman who fathered Tax Freedom Day, that mythical point in the year when working taxpayers have at least conceptually fulfilled their tax obligations to the various levels of government.

In the U.S., Tax Freedom Day is next Tuesday, April 18. In Canada, it is June 15.

Broken down, Louisiana’s Tax Freedom Day is the earliest to arrive among the 50 states; New York’s is the latest. In 2022, Manitoba’s freedom arrived first, while Quebec’s was last, according to the Fraser Institute.

While this nearly two-month delta at the national level might have Americans taking some mathematically non-verifiable comfort that they are not paying taxes in Canada, Canadians should ask themselves whether they are getting the value they expect from the taxes they pay in the first half of every year.

That’s because whether or not you believe the concept is an accurate calculation of your tax burden, it is worth a moment to reflect on how well your hard-earned dollars are being spent by those in charge.

Proponents of the Tax Freedom Day idea, created by Mr. Hostetler in the 1940s, use it regularly as a political sword, suggesting the later in the year it occurs the more overtaxed the average person is. Predictably, it is a favourite tool of conservatives on both sides of the border to call out traditional tax-and-spend liberal policies, which theoretically push Tax Freedom Day further into the year.

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How does the alternative tax measure work, really?

Detractors of Tax Freedom Day lean hard on mathematics to declare the concept so much bumpf – poorly conceived, poorly calculated and usually misleading. The left is often quick to pooh-pooh it, suggesting the calculation is too simplistic to make any meaningful sense and there are too many variables at play to make Mr. Hostetler’s concept real enough for any purpose, including weaponizing partisan barbs.

Considering these widely varying views, is there value in the Tax Freedom Day concept beyond being a provocative cocktail party conversation thread?

At the very least, the difference between the dates in the U.S. and Canada is one of those things that should make you wonder why. And if you’re an expat on either side of the border, it should make you wonder if you need a better accountant.

Despite the advantage over Canadians on paper, Americans of all political stripes will still complain about the government’s mismanagement of the taxes they pay. Conservatives will rail against support for the Green Agenda and taxpayer funding of abortion; the left will call out public funding for fossil fuel production and the military. Both sides will point to the woeful state of public education and health care as examples of their tax dollars not working.

Many Canadians will quickly tell you their tax dollars are spent in much more useful ways than in the U.S., an apparent reflection of their belief in government’s ability to do the right thing and justification for having Tax Freedom Day come halfway through the calendar year.

A popular proof point is Canada’s health care system, said to be far superior to the American system and prompting politicians like Vermont Senator Bernie Sanders to hold up the Canadian solution as a shining example of how to do it properly.

In some respects that may be true, but much of the rhetoric will conveniently leave out the dirty secret about health care in Canada: Patients in Canada now face the longest delays to see a specialist since the Fraser Institute began tracking wait times in 1993.

Mr. Hostetler would probably chuckle at the attempts to unravel – and undermine – the methodology behind his calculation. He was a businessman, not a mathematician or accountant. He simply took his annual income, laid his tax rate over it, then laid the whole thing over the calendar. And whatever date made sense, well, at least in his mind, that’s when he stopped working for Uncle Sam and started working for himself.

The point is, as fun as the Tax Freedom Day concept is to debate, the reality is we all pay taxes every day of the year – and long after our own personal Tax Freedom Day has passed.

Whether you pay taxes in the U.S. or Canada, be thankful you’re not in Belgium or Hungary, where Tax Freedom Days don’t come until August.