It’s been commonly said that there are three certainties of human existence: life, death and taxes. For Canadians, however, that phrase should be edited slightly to, “life, death and high taxes” — especially when comparing our tax rates to our southern neighbours.
A recent report from The Hub underscores this reality, as author Alicia Panincic estimates that, “the typical Canadian pays 70 percent more income tax than the typical American.”
To put this ratio into perspective, Panincic found if Canada had the same combined average income tax rates as the U.S., the typical Canadian would pay $4,000 less each year. That’s a lot of cash Canadians could save if our tax system looked a bit more like its American counterpart. So, how exactly do the numbers break down?
How much ‘typical Canadians’ currently pay
According to data from Statistics Canada, the median income for Canadians who filed their taxes in 2023 was $47,650. In her research, Panincic found that the median Canadian income earner pays just over 17% in taxes — including federal and provincial taxes. That said, the exact amount a typical Canadian is taxed depends on their province of residence.
For example, someone making the average wage of $50,670 in Alberta would be taxed 10% by the province and 15% by the federal government — totaling $8,317 after taking into account basic personal amount credits. Someone from Nova Scotia, however, would pay approximately $10,357 in taxes or over 20% of their income.
How much average Americans pay in taxes
Data from the United States Census Bureau shows that in 2023, the average American earned approximately $45,105. Additionally, numbers from the Tax Foundation shows that Americans across various states have a clearly smaller tax rate when compared to Canadians, whereas some states (e.g. Texas) don’t charge any income tax whatsoever.
Overall, Panincic’s analysis of publicly-available data found that the average tax rate for U.S. citizens was a mere 10%. For the states that levied no state income tax, residents would only be taxed around 7% to 8% on their income.
What your income tax revenue is used for
The difference in U.S. vs. Canadian tax rates can seem unfair at first blush, but it’s important to keep that data in line with the bigger context, namely, Canada’s impressive public benefits and government funded-projects.
For instance, Canada has government-funded universal healthcare for everyone in the country. Revenue generated from collecting income tax helps pay for expert doctors, nurses, midwives and other healthcare professionals to care for you without sending you a bill later.
As part of the 2024 Federal Budget, the federal government announced an injection of nearly $200 billion over a decade to help improve universal healthcare across the country. The Canadian Dental Care Plan — a program that provides dental coverage for Canadians without private insurance — was also rolled out as part of last year’s budget.
In addition to world-class healthcare, federal and provincial governments use tax revenue to pay for a number of benefits, services and facilities, such as:
- Education and schools
- Road and bridges
- Libraries
- Swimming pools
- Wildlife conservation efforts
- Emergency services (e.g. police, fire services)
- National defense efforts
Advice on how to manage a higher income tax
Facing a higher income tax burden can feel daunting, especially if you’re trying to work towards major savings goals like retirement. Indeed, according to the Fraser Institute, the average Canadian family will pay over 43% in taxes this year.
Wondering about how you can pay less in taxes? Try following this advice:
- Contribute to registered savings accounts. Canadians have access to a number of savings accounts that reduce your taxable income based on your contributions. The most common is the RRSP, but also includes a First Home Savings Account (FHSA). Both accounts reduce your taxable income by contributing, but the FHSA can only be used to purchase a home.
- Claim as many expenses as possible. Even if you’re not a business owner, you are eligible to claim certain expenses on your tax return to lower your tax bill. You can claim medical, educational, child-care and moving expenses to deduct from your taxable income. For a full list of deductions and credits, review the CRA’s online list. Make sure to keep records of all your relevant receipts.
- Hire a professional. As a non-tax professional, you likely don’t have all the information you need to claim as many benefits and deductions as possible to lower your taxes payable. Hire a professional to prepare your tax return instead.
While at first glance Canada’s tax rates might seem unfairly high compared to our American neighbours, it’s vital to remember the innumerable benefits that come with those costs. With a world-renowned healthcare system, stunning landscapes, a diverse history and a wide range of available tax-reduction strategies, we should all be proud to call Canada home — even if it might cost a bit more.
Sources
1. The Hub: The typical Canadian pays 70 percent more income tax than the typical American, by Alicia Planincic (May 27, 2025)
2. Statistics Canada: Annual wages, salaries and commissions of T1 tax filers, 2023 (Apr 1, 2025)
3. United States Census Bureau: Earnings in the Past 12 Months (in 2023 Inflation-Adjusted Dollars)
4. United States Census Bureau: State Individual Income Tax Rates and Brackets, 2025, by Andrey Yushkov, Katherine Loughead (Feb 18, 2025)
5. Government of Canada: 2024 Budget
6. Fraser Institute: This Sunday, June 8, is Tax Freedom Day, when Canadians finally start working for themselves, by Milagros Palacios, Jake Fuss and Nathaniel Li (Jun 5, 2025)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
