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The Canadian ( Tax ) way...
Old 08-26-2016, 11:55 AM   #1
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The Canadian ( Tax ) way...

This came my way last week. Interesting read. We live in Nova Scotia, the Canadian province with the highest taxes in Canada... and North America...

Perhaps its time to move


"An interesting read from the National Post that I thought I would share. Simply a report from the Fraser Institute (an economic "think tank") that studied what a "typical" Canadian family pays in taxes. For some comparison, I assumed a single Nova Scotian who earns $100k per year. Lives in a $400k tax assessed home, saves $10k per year and spends $500 per month on food (which we assume is non-taxable). Let's see what they would pay in tax.



Income tax $29,949 (from the Ernst&Young 2016 tax calculator)

CPP $2,549 (double this if the individual is self-employed)

EI $955

Property Tax $5,400 (assumes a 1.35 mil rate)

Consumption tax (HST/GST) $7,672 (After tax income-savings-food-property tax * 15% HST rate)



Total ~ $46,525



A lot? Perhaps, but we have to admit, we do live in a pretty decent country where people tend to care about each other J. Putting some context around it, if you were uninsured (health) in the US and had a simple leg fracture. Costhelper.com reports that the cost to treat this at a US hospital would be ~ $16k (USD). Imagine what something more serious would cost."
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Old 08-26-2016, 12:35 PM   #2
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A person living like also pays a very tricky secret "tax" , ok, it's not a tax really but for investments in Canada it's very common to pay a 2.35% MER (Management Expense Ratio) on mutual funds.
Yes the actual MER varies per fund just like the US, but the CDN ones are extremely high.
There is no Vanguard in Canada.

So I view that as an extra cost of living in Canada 1% of your invested money if you own funds/etf's.
Taking the example of someone earning 100K, after working they might have 1MM saved and that EXTRA fee would $10,000 more than in the US.

The answer of course in Canada is to buy stocks.
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Old 08-26-2016, 12:37 PM   #3
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Flip side is in US, it's pretty easy for a couple to spend $12,000 on health insurance per year for premiums, deductibles, co-pays, etc.
Cost is much less if employer has health insurance, but still easily $4,000 per year.
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Old 08-26-2016, 12:44 PM   #4
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There is no Vanguard in Canada.
Actually, there is.

https://www.vanguardcanada.ca/individual/portal.htm
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Old 08-26-2016, 01:31 PM   #5
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And iShares by Blackrock, BMO, TD eSeries, etc... all low MER ETFs or funds.

And of course, they even let us Furriners buy American stocks and ETFs as well !! (proud and happy owner of VTI and VXUS)
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Old 08-26-2016, 02:41 PM   #6
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I'm so excited... this is good to know, but then I find out, it's 1/2 way there:

"Vanguard ETFs™ are traded on Toronto Stock Exchange. Two ways to purchase Vanguard ETFs are with the help of a financial advisor or through a brokerage account."

There is no actual Vanguard brokerage site at this point.

Still that is an improvement over the past.
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Old 08-26-2016, 02:43 PM   #7
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Yes it is costly to live in Canada. There are many advantages though. Taxes aren't one of them.
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Old 08-26-2016, 03:02 PM   #8
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Yes it is costly to live in Canada. There are many advantages though. Taxes aren't one of them.
I think Victoria, BC is one of the most beautiful places in the world
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Old 08-26-2016, 03:23 PM   #9
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I'm pretty sure if you picked the highest tax state in the US - Cali or NY I suppose - you wouldn't be far behind those numbers. FICA tax alone is 7.65% which on 100,000 earnings would be $7,650 - double that if self-employed. States and some localities levy their own income taxes which you have to file separately of course and which can be quite high. Sales taxes are lower in the US but can still run close to 10%. The biggie though that isn't accounted for is the cost of healthcare. As others have said, between premiums and out of pocket costs, that can easily run up over $10K annually even for a single person. Also, IIRC, the Fraser Institute isn't an unbiased souce; other tax comparisons between the two countries yield wildly different results depending on individual situations. Also, the estate tax situation probably muddies the water a bit and helps heirs of modest estates (< ~$5M) more in the US than in Canada because US heirs get a free step-up in basis for appreciated assets whereas Canadians have the deemed disposition approach to dealing with decedents and the step-up in basis for heirs.
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Old 08-26-2016, 04:23 PM   #10
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Yes total tax burden in Ontario is similar to (and in some cases less than) NY/Mass/Cali and people don't wind up filing for bankruptcy due to medical issues. The major difference in income tax is for incomes over 170k or so, thresholds for top rates are set lower in Canada. Very happy to pay my taxes but of course do my best to minimize them.

And yes, we can thank Mr Bogle north of the border as well and have been able too for some years now. And prior to that no reason not to hold VTI and the like.
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Old 08-26-2016, 04:49 PM   #11
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I'm pretty sure if you picked the highest tax state in the US - Cali or NY I suppose - you wouldn't be far behind those numbers. FICA tax alone is 7.65% which on 100,000 earnings would be $7,650 - double that if self-employed. States and some localities levy their own income taxes which you have to file separately of course and which can be quite high. Sales taxes are lower in the US but can still run close to 10%. The biggie though that isn't accounted for is the cost of healthcare. As others have said, between premiums and out of pocket costs, that can easily run up over $10K annually even for a single person. Also, IIRC, the Fraser Institute isn't an unbiased souce; other tax comparisons between the two countries yield wildly different results depending on individual situations. Also, the estate tax situation probably muddies the water a bit and helps heirs of modest estates (< ~$5M) more in the US than in Canada because US heirs get a free step-up in basis for appreciated assets whereas Canadians have the deemed disposition approach to dealing with decedents and the step-up in basis for heirs.
Federal income tax for $100k earnings, MFJ, std deduction = $20,088 (2016) plus Ca income tax would be $3,712 (NY would be $4,891). All per Income Tax Calculator - Tax-Rates.org
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Old 08-26-2016, 05:22 PM   #12
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Federal income tax for $100k earnings, MFJ, std deduction = $20,088 (2016) plus Ca income tax would be $3,712 (NY would be $4,891). All per Income Tax Calculator - Tax-Rates.org
Yes that's income tax. The Fraser counts every last levy. Sales tax, property tax, social security, unemployment insurance, health surcharges, etc, etc. These can really add up in some places in the US. Found it interesting that counties and cities can levy there own additions to sales taxes in some places in the US.
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Old 08-26-2016, 07:06 PM   #13
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It all depends on your personal circumstances. In general, low income earners do better in Canada, while high income earners do better in the US.

Do Canadians Really Pay More Taxes Than Americans? | Investopedia

Just be glad you don't live in Sweden!

Sweden v. Canada: Taxation and Inequality | Ian Welsh
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Old 08-26-2016, 08:16 PM   #14
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A lot Perhaps, but we have to admit, we do live in a pretty decent country where people tend to care about each other J. Putting some context around it, if you were uninsured (health) in the US and had a simple leg fracture. Costhelper.com reports that the cost to treat this at a US hospital would be ~ $16k (USD). Imagine what something more serious would cost."
Canadian couple forced to live apart after 62 years - BBC News
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Old 08-26-2016, 08:33 PM   #15
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This happens in the US too only there it often involves the couple being impoverished. There's nothing going on in the article. The old guy will be moved over before long. Life can be inconvenient sometimes. Or maybe a better headline would be: "Couple happily married 62 years throws lonely old lady out of her nursing home to be together"
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Old 08-26-2016, 08:59 PM   #16
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Federal income tax for $100k earnings, MFJ, std deduction = $20,088 (2016) plus Ca income tax would be $3,712 (NY would be $4,891). All per Income Tax Calculator - Tax-Rates.org
Doing it for a single filer as in the O.P. example, and adding up Federal and NY income tax along with FICA yields a total of $31,513. Property tax on $400K assessed house value in Suffolk County, NY is nearly $9,000 annually! Now that would result in being able to take advantage of itemizing your deductions but still... And sales tax is 8.6%.
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Old 08-26-2016, 09:05 PM   #17
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This happens in the US too only there it often involves the couple being impoverished.
Exactly! Folks in the US who don't have $50K+ annually for a nursing home have to spend themselves into penury and then go on Medicaid. I may be wrong but I don't think folks in Canada have to do the same.
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Old 08-27-2016, 02:49 AM   #18
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I saw a segment on the local news a few days about this couple. I feel for them. One of the items missing from the BBC article is that the fellow suffers from dementia, which originally complicated care needs.
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Old 08-27-2016, 04:40 AM   #19
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I did not run specific math but I think it is quite likely that in a low tax area of the US you could purchase health insurance and still have $ left over.
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Old 08-27-2016, 06:48 AM   #20
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It all depends on your personal circumstances. In general, low income earners do better in Canada, while high income earners do better in the US.

Do Canadians Really Pay More Taxes Than Americans? | Investopedia

Just be glad you don't live in Sweden!

Sweden v. Canada: Taxation and Inequality | Ian Welsh
Agree. I figure I would do quite a lot better in the US. Living in Alberta, my max marg tax rate is 48% on regular income over about $200,000 in total earnings. Divs are 31.7% and cap gains 24%. No sales tax in Alberta and property taxes are quite low. Health care mostly included.

Prior to the recent Canadian tax increases my rates would have been much more comparable to typical high tax US states.
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