U.S. cities far less taxing

The more you make, better off you are south of the border: study

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Canadians who move to the United States will keep more money in their pockets after taxes and the more they make, the more they'll get to keep, according to a Conference Board of Canada comparison of a dozen Canadian and U.S. cities.

The report, released yesterday, adds more fuel to the debate over whether Canada is losing skilled workers to the U.S.

After analyzing income, sales, payroll and property taxes in Calgary, Halifax, Montreal, Ottawa, Toronto, Vancouver, and comparing them with those in such target destinations of emigrating Canadians as Charlotte, North Carolina, Jacksonville, Florida, Chicago, Houston, Los Angeles and New York City, the board found a clear tax advantage in emigrating to the U.S.

"The lesson is that even though some Canadian cities may be lower in terms of cost of living than their U.S. counterparts, the advantage in Canada is so small in comparison to the personal tax disadvantage that, in the end, all the U.S. cities in our sample come out ahead," states the board's study.

In Canada, a person who earns $50,000 yearly pays 38.8 per cent of gross income in various taxes, compared with 31.7 per cent for a person earning $50,000 in the U.S.

At the high end of the earning scale in Canada, a person earning $250,000 pays 41.2 per cent of gross income in taxes, while in the U.S., a person earning the same pays 29.7 per cent.

Canada's higher rate of income and provincial surtaxes were cited as reasons why people in the U.S. cities studied fared better, according to the conference board, an independent non-profit organization that researches public policy.

And while people in the U.S. are taxed higher for social security, the overall weight on the tax burden is lower because no U.S. federal tax equivalent to Canada's goods and services tax exists.

The board found that of the Canadian cities it studied, Vancouver had the highest tax burden, 43.7 per cent, and Calgary had the lowest, 35.5 per cent. The next-lowest was Halifax with 41.4 per cent followed by Ottawa at 41.6 per cent, Toronto at 41.9 and Montreal at 43.2 per cent.

It found that when the cost of living is included, Vancouver emerged as the most expensive of all 12 cities studied to live in and that Houston and Jacksonville were the least expensive cities to live in.

The report, based on the 1998 tax files of households of two adults and two children, said Canadians who move to the United States do not "automatically reap the benefit of lower taxes."

Canadians would still be taxed in Canada on their "worldwide income," which includes U.S. income until they surrender their Canadian residency status.

Surrendering residency is a legal process that involves such considerations as the length of time such persons will be living in the U.S., whether their families will join them and the number of times they will return to Canada.

Not only is the brain drain real, there are obstacles to jump over before a person can be part of it, said Walter Robinson, federal director of the Canadian Federation of Taxpayers.

"And the fact that people are willing to do that points really to partly the oppressive level of taxation vis-a-vis to our neighbours south of the border," Mr. Robinson said.