Can You Compare Tax Rates Across Jurisdictions?

There is small advantage to comparing things that are not comparable.  How far Bubba Watson hits a golf ball is not readily comparable to the average height of players in the NBA. 

Pew Research recently published a comparison of income tax rates.  America’s tax bills below average.  They call the comparison, “complicated and tricky.”  A gigantic understatement.

While not common, I have occasionally been asked to compare tax rates across jurisdictions.  It is not easy and more likely good only for giving you an idea of what jurisdictions to avoid.

Some of the obvious difference I have seen:

Federal rates are interesting but they are a bit philosophical.  Provincial and state, even city income tax matters. In Ontario the top provincial rate is around half of the federal rate.  Federal rates could look low but no one cares about that rate of tax, they care about the check they write.

Health Insurance.  An American acquaintance is paying a bit over $2,000 per month for family coverage with a $5,000 deductible.  In Ontario that would be about $300 per month with no material deductible and most of the rest built in to the tax rate.  Comparing services could easily complicate that further.

Municipal taxes.  In 2015 Yogi Berra’s estate sold his Montclair NJ home for $888,888.  It is about 4,500 square feet and sits on a half acre lot.  Municipal taxes in 2013 were $28,727.  A home of similar value here would attract municipal taxes of around $7,000 and if it were in Toronto, less.

Cost of higher education.  There are no private colleges like Harvard here, but University of Toronto and University of Waterloo both have excellent records.  Tuition fees would be well less than $8,000 for either

Payroll taxes are an issue too.  Social Security and others may total something close to what we pay for a government pension plan, employment insurance, employer health tax, and workers compensation.  Case by case basis.

Sales taxes are all over the place in the United States, and in Canada too.  Provincial and state taxes must be studied individually. The national sales tax here (5%) raises lots of money.  It is a bit voluntary.  The more you consume, the more of it you pay.

Tax comparisons end up being quite personal.  Income tax is a part, but other things matter too.  Total tax matters.

You cannot get it exactly right.  Find the lifestyle you want with a few places to choose and then compare.  It is about meaning.  Taxes should not drive the lifestyle bus.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  866-285-7772

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