Disclosure. I am a licensed Financial Security Advisor, Mutual Fund Representative, and Group Insurance & Annuity Plans Advisor. I am not a lawyer, tax lawyer, or accountant. I discuss taxes only as they relate to specific insurance, investment, and estate strategies; I do not provide general tax optimization or comprehensive financial planning. Content is educational only. Mutual funds offered through WhiteHaven Securities Inc. Insurance products offered through iAssure Inc. Coordinate decisions with your CPA, notary, or lawyer. See Disclaimer and Privacy.
Why this is important
Official CPI shows ~75% cumulative inflation from 2000 to 2025. Include taxes and the number is 110 to 130%.
Taxes are the largest household expense at 42.3% of income. CPI excludes them entirely.
Pensions and wages indexed to CPI lose purchasing power relative to what households actually pay.
Why your costs rise faster than official numbers suggest
The Gap You Feel Is Real
Official CPI says inflation has been ~2.3% annually since 2000. Your bank account says otherwise. The gap exists because CPI ignores your largest expense: taxes.
Official CPI (2000-2025)
~75%
~2.3% per year
Felt Inflation (with taxes)
~120%
~3.2% per year average
The Difference Over 25 Years
+45%
Hidden purchasing power loss
The Acceleration Since COVID
The 3.2% average is over 25 years. The real acceleration happened in the last five years. Food prices rose 21% from 2020 to 2024. Shelter costs jumped 30%+. Property taxes in many municipalities increased 5-7% annually. If you isolate 2020 to 2025, felt inflation is likely 5 to 8% per year. The 25-year average masks what is happening now.
Why the Gap Exists
CPI measures price stability. It tracks a basket of ~700 goods and services. It makes "hedonic adjustments" for quality improvements.
What CPI ignores:
Income taxes, federal and provincial
Payroll taxes like CPP/QPP and EI
Property taxes (mostly)
Full mortgage principal payments
Full childcare costs
Out-of-pocket health costs
The largest omission is taxes. For the average Canadian family, taxes are the single largest expense.
Taxes: The Expense CPI Ignores
Total Tax Bill (2024)
$48,306
Share of Income
42.3%
Increase Since 2000
+101%
Source: Fraser Institute, Canadian Consumer Tax Index 2024
In 1961, the average Canadian family paid 33.5% of income in taxes. By 2024, that figure reached 42.3%. Tax dollars paid have more than doubled since 2000.
CPI ignores this entirely.
The True Household Basket
When you include taxes in household outflows, the picture changes completely.
Category% of Total Outflow
🔶 Total Taxes38.6%
Shelter (mortgage/rent)19.7%
Transportation9.7%
Food9.6%
Everything else22.4%
Source: Statistics Canada SHS 2023, Fraser Institute 2024. See full methodology.
Taxes are the largest single category. CPI pretends they don't exist.
What This Means for You
Your Cash Loses Value
If felt inflation is 3.2% and your savings earn 2%, you lose 1.2% purchasing power every year. Over 25 years, that compounds.
Projections Are Wrong
If you assume 2% inflation in retirement projections, you underestimate future costs. The gap grows every year.
Corporate Surplus Erodes
Retained earnings in cash or GICs lose real value. The direction matters more than the exact number.
This Resonates If...
You've noticed household spending rising faster than "2% inflation"
You have significant cash or conservative investments in your corporation
Your long-term projections use CPI as the inflation assumption
You're planning for retirement, succession, or estate over the next 10 to 20 years
Full Research
This article is a summary. For complete calculations, data sources, and methodology, see:
Inflation, Cost of Living, Household Economics, Business Owner Strategy, Taxes
Full Disclosure.
This content is for information and education only. It explains general concepts that may apply to incorporated business owners, but it is not personalized tax, legal, or investment advice.
Tax Considerations:
Tax rules are complex and subject to change
Strategies and benefits depend on your specific circumstances, province, and business structure
Always consult with a qualified CPA before implementing any tax strategy
Provincial variations in rates and rules may apply (Québec vs. Ontario differences exist)
Past tax treatment does not guarantee future treatment
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Investing involves risk, including the possible loss of principal
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Investment values fluctuate with market conditions, and you may receive less than you originally invested
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