The government has been reaching deeper and deeper into taxpayers' pockets since 1961, with the total tax bill for the average family increasing by 1,600 per cent or $26,792, according to a new report from The Fraser Institute.

The report, dubbed Tax Facts 14, was released Wednesday, and takes a hard look at how taxation is affecting the pocketbooks of taxpayers.

It comes just one week before Prime Minister Stephen Harper's Conservative government releases its first budget, which is expected to include a promised 1 per cent cut to the GST.

The government has defended the cut as the fairest way to ensure all Canadians benefit from a tax break, but critics say they fear it will displace reductions to personal income tax that were planned by the previous Liberal government.

The Fraser Institute study finds that Canadians now pay more annually in taxes than they spend on shelter, food and clothing combined.

In 1961, the average household earned $5,000 and paid $1,675, or 33.5 per cent, of that in taxes. The average family in 1961 spent $2,824 on food, shelter and clothing per year.

In 2005, the report found, the average family earns $60,903, and spends $28,467 of that, 46.7 per cent, on taxes. The average family now spends $22,167 on food, shelter and clothing per year.

The increase in spending on shelter represents a climb of 1,006 per cent, while spending on food has jumped by 481 per cent and spending on clothing has increased by 439 per cent.

The report indicates that income tax accounts for the largest portion of the tax Canadians pay, at about 32 per cent. Other taxes, however, such as contributions to the Canada Pension Plan, Employment Insurance premiums, and a variety of other taxes including motor vehicle fees and property taxes add up to round out the remaining two thirds of the tax bill.

The Fraser Institute report also underscores the disparity between earners and taxpayers at both the high and low ends of the spectrum.

In 2005, 60.3 per cent of all income in Canada was earned by the top 30 per cent of families, who also paid 66.3 of the taxes.

In contrast, the lowest 30 per cent earned only 7.8 per cent of all income and paid 4.3 per cent of all taxes.

Niels Veldhuis, the co-author of the report and senior research economist at The Fraser Institute, pointed out that the distribution of income is less polarized than it appears at first glance, because earners are consistently moving through the income grid.

"Income mobility data has repeatedly shown that there is not a permanent underclass in Canada stuck in a low income group," Veldhuis said.

The report found that most young people entering the work force start out in the low-income bracket and work up to the middle or high-income group, with their incomes peaking in middle age before beginning to drop as they age towards retirement.

Go-getters penalized

Another interesting phenomenon illustrated by the report is the way the Canadian taxation system penalizes ambitious earners who climb the income ladder.

In one example, a fictional Canadian who earned $2,750 in 1961 paid $960 in taxes, equaling 34.9 per cent.

In the following 44 years, however, his income rose steadily until it reached $122,657 per year in 2005. At that point, he would pay $62,278, or 50.8 per cent, in taxes.

Between 1961 and 2005 the subject's income increased by 4,360 per cent, but his tax rate increased by a much higher rate of 6,387 per cent.

"Canada's progressive tax system imposes an ever increasing burden on people as they earn more income," stated Veldhuis, "Clearly our tax system is sending the wrong message when it penalizes people for being successful."