Message from Ottawa: Go south young man, go south
By Kevin Avram
Technically, there are 50 000 Canadians heading south each year, but that number doesn't come close to explaining what's actually going on. Some estimates are that nearly half of recent graduates in medicine, science, and management have pulled out. Canada is losing its brightest and most innovative.
What most people don't know, is that in addition to these, there are tens of thousands of Canadians who are eligible to work and live in the United States without technically immigrating. They still show up on the roles as Canadians. They're not technically permanent US residents. Yet, they live and work in places like Sacramento, Phoenix, and Dallas. They're in the US and working in the US, due to a clause in the North American Free Trade Agreement (NAFTA).
One of the key features of NAFTA is that it allows professionals, academics, consultants, and professional managers to apply to the US Immigration Department for a one-year entry Visa. The Visa is renewable every 12 months. It costs about $60 to get a NAFTA entry Visa and can be obtained in less than a week. Once a Visa is obtained, getting a US Social Security number takes another week, and presto, life can be started over in Dallas or Minneapolis.
Texas and Florida both have no state income tax. Neither does Nevada, New Hampshire, Washington, Wyoming, or South Dakota.
In states where there is individual income tax the rates are generally low. In Arizona, income tax rates are between 3 and 5 per cent. Colorado's income tax is 5 per cent of federal tax payable, and federal income taxes are much lower than in Canada. Illinois and Indiana each have just one rate of income tax. In Indiana it's 3.4 per cent. Illinois's is 3 per cent. Michigan's income tax is 4.4 per cent, and everyone pays the same rate regardless of income. Tennessee has an income tax of 6 per cent, but it only applies to income that's earned from dividends or interest. Monthly paycheques are not taxable. Pennsylvania has a one-rate income tax too. It's 2.8 per cent.
By comparison, in Ontario and Quebec, the combined marginal income tax burden - both federal and provincial - stands at 55 per cent for earners in the $60 000 range. That same Canadian working in the US, filing a tax return as a couple, would only pay a 15 per cent federal tax. They would have to earn $283 000 to reach the top US income tax bracket, which would still be lower than the Canadian at $60 000. The top US tax bracket is 39.6 per cent. And, there are more deductions, like interest paid on a home mortgage.
Gasoline in the US, which is a primary source of tax revenue for many state governments, hovers around $1 per gallon, or slightly above. This translates into lower transportation and distribution costs. Low taxes mean that people have more money to invest. The Dow Jones Industrial Average in the US has tripled since 1989. The Toronto Stock Exchange average has increased by just 70 per cent. And consider the fact that over the past decade, Canadian income per person grew by just 7 per cent, while it grew by 17 per cent in the US. What's more, if Canadian productivity had grown at the same rate as the US since 1979, Canada's income per person would be $7 000 higher today than it is. That's $28 000 per family.
In addition to outrageously high income taxes, capital gains taxes in Canada are double what they are in the US. Sales taxes, not even counting the GST, are generally higher in Canada too. When you toss in the GST, sales taxes are more than double what they are in the US.
The bottom line is that taxes are killing Canada. And, unless Ottawa begins to make significant changes, Canada will find its reputation as a desirable place to live and invest, fading into the sunset.
Kevin Avram is a former director of the Prairie Centre/Centre for Prairie Agriculture, and continues to sit as a member of the Prairie Centre's Advisory Board.
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