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

[ladyceleste.livejournal.com]

*adds this onto list of "reasons to move to Toronto and/or Nova Scotia in the next 10 years"*

Thanks for the comparison!

[thebitterguy]

Ah, Nova Scotia's awesome. My wife keeps talking about retiring there, and it is attractive.

[leonard-arlotte.livejournal.com]

You forgot one thing in your accounting for US taxation.

FICA.

That's what we all put in for our Social Security and Medicare. There's no getting out of it. For anyone.

Google Search gave me this:




2007 FICA Tax Rates
Tax Tax Rate Maximum Wage Base Maximum Tax
Social Security 6.20% $97,500 $6,045
Medicare 1.45% No limit No ceiling

[undeadmuse.livejournal.com]

2 years for me to NS!

And then there's the extra secure feeling in Canada of not having to worry about losing your healthcare if you lose your job. That, in itself, is priceless and trumps everything else.

[thebitterguy]

But, you see, they're paying the price for our FREEDOM with their taxes, dude.

edit: I think they also get crazy big refunds on their taxes, like for interest on mortgages and things like that.

[undeadmuse.livejournal.com]

It's gorgeous, and I can't wait to go back next summer!

[pyat.livejournal.com]

I shall add that in!

[leonard-arlotte.livejournal.com]

Ugh, sorry for the formatting on that. More friendly:

2007 FICA Tax Rates:

Tax: Social Security
Tax Rate: 6.20%
Maximum Wage Base: $97,500
Maximum Tax: $6,045

Tax: Medicare
Tax Rate: 1.45%
Maximum Wage base: No limit
Maximum Tax: No ceiling

[leonard-arlotte.livejournal.com]

I should point out that New York is a very left-leaning state.

Indiana, where I live has the following tax rate:

State Income Tax: 3.4% for all residents of all incomes.
County taxes are added to this depending on where you live. My county adds 1.1%

Indiana has a State Sales tax of 7%.

My local gas prices are some of the higher in the state. Around here, the price of gas is (as of yesterday) $2.75-$2.80)

[bodhifox.livejournal.com]

'course, our women are more hawt. No wait, that's your women.

[pyat.livejournal.com]

Indiana women?

[thetathx1138.livejournal.com]

Hi, here from thebitterguy.

This is a pretty interesting breakdown and I'm fairly sure you're actually correct about overall rates. The US is a fairly tax-happy place, despite the bluster of our politicians. I do think your rates are a little off in practice, though: I pay about 25% all told.

I'm also curious about deductions, especially on the state level. For example, here in "Taxachusetts", I'm allowed to deduct a portion of my rent and a portion of what I pay for public transit out of my state taxes.

[postrodent.livejournal.com]

One factor is that American political divisions, especially on the east coast, are so teeny that people can work in a high-tax state like NY or MA, and shop and/or live in a low-tax state like NH or CT. This produces such lovely phenomena like the giant auto-sales strip just over the NH-MA border. I'd love to see an analysis of what this costs those high-tax states, especially since they have to bear the cost of wear and tear on infrastructure that's heavily used by out-of-staters. Of course, with the cost of fuel on the rise, maybe this phenomenon will correct itself.

[melstra.livejournal.com]

Very nicely delineated. I shall have to mark this for future reference. Though I suspect that you might be missing something on one side or ther other, it's still a good start.

[ladyceleste.livejournal.com]

It'll be nice, since we'd be going to Toronto to pursue the arts. Not much healthcare coverage in that realm in the US. Bah.

[pyat.livejournal.com]

For example, here in "Taxachusetts", I'm allowed to deduct a portion of my rent and a portion of what I pay for public transit out of my state taxes.

We can here as well, though it varies from province to province. I know I can get the GST on all transit fares as a rebate at the end of the year.

[pyat.livejournal.com]

Yup, for sure. For example, it doesn't mention Canadian CPP contributions.

[pwned-kisa.livejournal.com]

I pay about 25% all told.
21%, here.

[amarafox.livejournal.com]

I did a study on this one, too.

I am in the second tax bracket (barely) and I get taxed less than an american with the same income :D

[kisekileia.livejournal.com]

Thank you! I've bookmarked this.

[bodhifox.livejournal.com]

No yours, of course... Posted wrong.

[slothpuck.livejournal.com]

I guess everyone will pay more in taxes or have public spending reduced because of all the billions being thrown at the banks.

BTW I'm guessing VAT in the UK = Sales tax over there. Ours is at 17.5% !

SP

[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.

[slothpuck.livejournal.com]

BTW I'm not sure - what's canada's healthcare system like? We have the NHS ( http://en.wikipedia.org/wiki/National_Health_Service_(England) ) in the UK.

SP

[relee.livejournal.com]

Americans who pay for health care? Is there really such a thing? It seems like there isn't a week that goes by without me worrying about one friend or another who can't even see a doctor, let alone get treatment.