Taxes, without Death

[pyat]

I've had many an American friend make a crack about the high income tax I pay in Canada, to fund our socialized ice cream parties and national policy of providing free ponies for children under 5. Heck, I've heard many a conservative Canadian look admiringly southward and talk about the low, low taxes Americans are burdened with. It strikes me that comparing taxation rates in the two countries should be pretty straightforward. This is what I got from a shallow Google search:

Canadian Income Taxes
These are the most recent Canadian federal income brackets I could find:

0%: $0 - $9,600
15%: $9,601 - $35,595
22%: $35,596 - $71,190
26%: $71,191 - $115,739
29%: $115,740+

In addition, I pay provincial tax. For Ontario (which is higher than most) this is as follows:

6.05%: $0 - $36,020
9.15%: $36,021 - $72,040
11.16%: $72,041+

So, I pay 31.15% of my salary in federal and provincial income tax. In addition, I also pay a flat 4.95% for the Canadian Pension Plan, and 1.73% to Employment Insurance, which I collect if I get laid off.

So, total taxes for me in Ontario are 37.83%.

U.S. Income Taxes
Now, let us compare federal tax rates for an American:

10%: $0 - $7,300
15%: $7,301 - $29,700
25%: $29701 - $71950
28%: $71951 - $150150
33%: $150151 - $326450
35%: $326450+

Add to that a state income tax – we’ll use New York State, since it’s just a 40 min drive from me.

4%: $0 - $8,000
4.5%: $8,001 - $11,000
5.25%: $11,001 - $13,000
5.9%: $13,001 - $20,000
6.85%: $20,001 - $100,000
7.375%: $100,001 to $500,000
7.7%: $500,0001 +

I’d be paying 31.85% of my salary in federal and state income tax, if I were an American citizen. As leonard_arlotte notes, this does not take into account the Federal Insurance Contributions Act (FICA) taxes of 6.2% and 1.45% to support Social Security and Medicare, respectively.

My total income tax in New York State would come to 39.5%

Sales Taxes and Cost of Living
Now, this does not take into account the various sales taxes. Canada has a universal 5% goods and services tax, and most provinces have an additional sales tax. In Ontario, this is an additional 8%, or 13% total. Other provinces are less. In New York State, there is a 4% state sales tax, plus municipal and country sales taxes, averaging out to 8.25% total. So far as I know, there are no city or county sales taxes in Canada. Goods tend to be more expensive in Canada.

However, there are notable exceptions. The cost of food and housing is lower, for example, even in metropolitan areas. Toronto and Vancouver were listed 89th and 96th in 2004 on the lists of “highest costs of living” for cities worldwide. NYC was 12th, LA was 27th, Chicago 35th, San Francisco was 39th.

The price of gasoline is historically substantially higher, though this is dependent
on the dollar exchange. Currently, gas in Ontario is averaging at $1.07 CD per litre. Checking the East Coast U.S. prices online, I see they are currently averaging $3.22 US a gallon, or $3.83 CD a gallon, which comes to…. $1.01 CD a litre.

Cost of Healthcare
Now, U.S. citizens have one more expense than Canadians – private healthcare insurance. According to 2006 data, this averages $4,605 US annually for a single worker in New York state, and $12,075 US for family coverage.

If I were a freelance tech writer in New York state, the total cost of income tax, FICA, and health coverage for my family would represent 68.25% of my total income.

I realize, however, that most employers pay some, most, or all of this premium, which strikes me as a sort of needless tax on employers. Indeed, in 2004, U.S. automakers claimed that $1300 of the price of a new mid-sized car reflected the cost of providing healthcare benefits to their workers. According to wiki, GM spends $7 billion annually on healthcare coverage.

So, those are the numbers I was able to find. Are Canadians taxed more? That depends which province and state you’re comparing, but certainly the income tax rates are comparable, or lower in many cases.

Comments

[dagoski.livejournal.com]

One important thing to remember about US healthcare is the amount of effort that insurance companies go to avoid paying for the things they say they will. Also, there are hidden costs as copays continue to rise. So, even if your employer provides righteous health benefits like mine does, you can still get hit hard at the pharmacy. Also, the paperwork maze represents a serious hidden cost. Using myself as an example. When I died some years back, the ER revived me. However, the paperwork maze that my insurance and the hospital threw up proved to be almost impossible to penetrate. In the end, the insurance company went autistic and ran out the clock on the time in which they were obligated to pay my claims. I very nearly went bankrupt. Actually, I was too far down to actually declare bankruptcy by the time it occurred to me to do so. I solved the problem by submitting my financial information to the hospital and showing that I was destitute. The most insulting part of the process was explaining why I did not call my physician before being admitted and why I did not call the insurer after being admitted to obtain clearance for treatment. They basically refused to recognize the documentation that stated I was unconscious and dieing and later was comatose. This does not happen in places with socialized healthcare because there is no perverse incentive to deny care on the part of the payer.

[madmanofprague.livejournal.com]

So wait–you can be too in debt to decare bankruptcy?

[melskunk.livejournal.com]

YES!!!

I am personally TOO IN DEBT to be bankrupt, the fees are too high. I need to borrow money for it.

Sad but true :(

(Also Canadian but felt that had to be added to the comment as I'm getting that all the time now.. )

[dagoski.livejournal.com]

It costs about a thousand dollars for a simple bankruptcy and by the time I realized this was an option, I had just used the last of my money to pay rent and buy food. There were probably ways around this, but I was too panicked to find them. I figured I'd tell the hospital to go ahead and sue me. Luckily the patient advocate decided I was destitute.

[velvetpage.livejournal.com]

You see, in Canada, many people have employer-based insurance through private companies that's a lot like yours - except that it covers the extras instead of the basics. So instead of fighting with them to cover ER expenses, I fight with them to remind them that my iron supplements are still prescribed even if they're available over the counter, and they need to pay for them.

My employer-based health insurance covers prescriptions, dental, eye care, physio/chiro, orthotics - all the "bonus" stuff. I understand the average outlay for that stuff if you DON'T have employer-based coverage is around $2000 per year - obviously, since that's an average, the diabetic paying for insulin is paying more for that than I am, with a couple pairs of glasses and the occasional antibiotic or iron supplement.

But it's important to note that Americans struggling to pay for health insurance probably aren't getting most of those services at all - they're paying for them out of pocket, or their co-pays are so high that they might as well be.

[dagoski.livejournal.com]

To make matters worse, we in the US can often get that first visit, even a first ER visit. But, it's the follow through that you into problems with. Medication co-pays are escalating fast enough that I sometimes do better by paying cash and not putting it down on my insurance. You heard that right, with some meds, the price with the co-pay is, say, $30. Meanwhile, the basic retail price might be $15. You usually run into this with older medications. The insurer uses a price list that may or may not be based in reality. Meanwhile, the newer more effective asthma medications for me are costing more every year. However, the insurers are taking a hit of their own. Advair retails for $300. My co-pay is $80. I can remember plans in which all meds were five bucks; Kaiser for instance. However, you can imagine what these would cost an employer or individual. No guess what happens when McCain determines that health benefits are taxable income? I, as a chronic and high risk patient will probably be unable to find an insurer who will want to take me and the cost of my benefit will be added to my taxes and my employer's taxes. Under McCain, I will not be able to live in the US anymore. Not with any income I can earn. In McCain administration, I won't want to move to Canada, but rather I will have to move.

[velvetpage.livejournal.com]

With a degree like yours, you'd get in no problem, though it would be terrible for you to have to leave your country that you believe in so strongly.

If you need someone to sponsor you, you know who to ask. I hope it doesn't come to that, of course.