The numbers behind where Canadian family income actually goes may surprise you
The average Canadian family directed 42% of its income to governments in 2025, more than it spent on housing, food, and clothing combined, according to a new study published by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
The 2026 edition of the institute's annual Consumer Tax Index, co-authored by Jake Fuss, director of fiscal studies at the Fraser Institute, calculates that a family earning an average income of $121,111 paid $50,721 in total taxes last year. That compares with 36% of income directed toward the three core necessities combined.
The study accounts for both visible and hidden levies collected at all three levels of government: income taxes, payroll taxes, health taxes, sales taxes, property taxes, fuel taxes, carbon taxes, vehicle taxes, import duties, and alcohol and tobacco taxes.
"At a time when the cost of living is top of mind across the country, taxes remain the largest household expense for Canadian families," Fuss said.
Servus Credit Union economists Charles St-Arnaud and Oriane Kacoutie highlighted rising consumer proposals and warned that weakening employment could put further pressure on household finances.https://t.co/ACo5roObVH
— Canadian Mortgage Professional Magazine (@CMPmagazine) August 12, 2026
Six decades of shifting household costs
The contrast with 1961 is stark. That year, the average Canadian family spent 33.5% of income on taxes and 56.5% on necessities, a proportion that has since inverted.
Over those six decades, the total nominal tax bill rose 2,928%, outpacing cost increases in housing (2,349%), food (952%), and clothing (526%).
Even adjusting for inflation, the real tax burden increased by 189.5% over the same period, according to the Fraser Institute's Canadian Tax Simulator, 2026 — meaning the squeeze is not simply a product of rising prices.
The largest single component of that tax bill is income tax, which accounts for $16,085, or 31.7% of total taxes paid.
Payroll and health taxes follow at $11,312 (22.3%), with profit taxes at $7,182 (14.2%) and sales taxes at $6,972 (13.7%).
Property taxes add a further $4,307, or 8.5% of the total bill, a figure mortgage brokers will note sits on top of, not within, any standard mortgage payment.
The report also models what the tax burden would look like if governments had balanced their budgets rather than running deficits.
When deferred taxation from government deficits is factored in, the Consumer Tax Index rises to 3,324, implying the true tax bill of the average Canadian family has increased by 3,234% since 1961.
In fiscal year 2025/26, the federal government and all ten provincial governments ran operating deficits, with cumulative shortfalls totalling an expected $107.3 billion, according to the Canada Department of Finance and RBC, 2026.
"While Canadians can decide for themselves whether or not they get good value for their tax dollars, they should understand how much they pay in taxes each year and how much the tax burden has grown relative to other necessary costs they must pay," Fuss said.
What this means for mortgage qualification
For Canadian mortgage brokers, a 42% tax burden runs directly into qualification conversations. When government claims the single largest share of household income, what remains to service a mortgage, let alone accumulate a down payment, is tightly constrained.
That squeeze compounds pressures already well-documented across the market. New survey data found that nearly half of homeowners who renewed since January 2025 are directing 50% or more of their monthly budget toward housing costs.
Meanwhile, housing affordability worsened in all 13 major cities tracked by Ratehub.ca in May, as qualifying income thresholds climbed in every market.
Broader household financial data paints a similarly difficult picture. Household debt-to-disposable income reached 179.6% in Q1 2026, as Canadians are saving less and less.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
