6 ms·

As someone that recently moved to Canada this almost made me cry.

david-gpu 6y ago
Context for non-Canadians: income above CAD$220K has a marginal tax rate around 53% in Ontario [0]. It's similar in other provinces. [0] https://www.taxtips.ca/taxrates/on.htm https://www.taxtips.ca/taxrates/on.htm
- jonas21 6y ago
  To be fair, if you live in California and make $220K/yr, your marginal tax rate on salary is 46% (35% federal + 9.3% state + 1.45% medicare)
  - verst 6y ago
    Tax rate is 42% for all income above 55,960 Euros in Germany. That doesn't even include a few other taxes you might likely have to pay. Top tax bracket for the income tax portion is 45%.
    - klipt 6y ago
      But I assume housing is more affordable than the $2 million houses in Silicon Valley.
      - verst 6y ago
        Wages in Germany are much lower. Owning a home in a city like Berlin doesn't seem a lot easier than in SF. People are fine doing long term rentals with rent control. Not everything is about Silicon Valley. You can move away to afford better housing. That's what I did.
  - stickfigure 6y ago
    Plus a 9% sales tax, and high property taxes if you bought in recently.
    - ec109685 6y ago
      California property taxes aren’t that high, even for new owners compared to other states.
      - cgriswald 6y ago
        In this case the relevant metric is property tax as a percentage of income rather than as a percentage of property value. On average, California is somewhere around 15th in the nation, but there's a sharp divide between new owners and grandfathered owners.
  - PaulDavisThe1st 6y ago
    also, as ever, we have to note, since so many people do not understand it, you do NOT pay 35% federal tax on your income, you only pay 35% of your income above a certain level.
    - seangrogg 6y ago
      Marginal tax rate (which is specified) is at least how much you'd owe on every dollar of income after. Average tax rate is how much tax you actually paid against income.
      - PaulDavisThe1st 6y ago
        Most people (particularly in the US) do not understand this. In addition, the actual placement of the tax makes a great deal of difference. Owing 35% on income above $35k is very different than owing 35% on income above $220k. Very people know where the tax brackets are.
  - jandrese 6y ago
    Your tax rate is actually around 57% because you forgot to include your medical insurance of around 11% at that salary for a family of 5. Roughly $2,000/month. If you are comparing tax rates with first world countries you need to include your health insurance costs or the results will be skewed. Luckily with a salary in the top 2% nationally you can afford insurance. The same can not be said of people who are not rich.
    - ibeckermayer 6y ago
      Why would you choose family of 5 as your point of reference? That’s very uncommon in tech-California.
    - AdrianB1 6y ago
      Is the health insurance cost a percentage of your income? I thought it is a fixed amount based on what the insurance is covering.
      - jcrawfordor 6y ago
        Little bit of both. It's a fixed rate, but a lot of employers use a "tier" system where the rate depends on your income.
      - jandrese 6y ago
        It's harder on the poor. The percentage figures will vary based on your income level. Luckily the OP chose an income level in the top 2% of all Americans which made it a somewhat reasonable level. This was also an individual plan bought on a healthcare exchange. Large employers have a stronger negotiating position and can get somewhat better rates, but in the end you're still basically paying a tax and it is disingenuous to compare tax rates with countries that provide socialized healthcare with their taxes and not include the cost of healthcare coverage in the States.
        AdrianB1 6y ago
        It is not fair to compare taxes between countries with and without healthcare, but it is almost impossible to compare otherwise. For example USA has huge prices and excellent services compared to almost any other country, in my country (Romania, Europe) the socialized healthcare is so bad many people have a private insurance, I have 2 private insurances through my employer and I still pay out of the pocket about half of everything I get (100% of dental care is out of the pocket, most consultations are covered by the private plan, most treatments are out of the pocket).
  - ec109685 6y ago
    Marginal tax rate is a weird way to look at it when you list a specific salary. You should use the actual effective tax rate that person would pay, which is 34.8%, fico, state and federal.
    - refurb 6y ago
      It's helpful for people making high incomes, but yes, you're correct, it doesn't provide much clarity on the actual taxes paid. At $220,000 CAD, the tax rate in BC (one of the lowest in Canada other than Alberta) would be 35.8%. In Quebec, it would be 42%.
  - vkou 6y ago
    You're also forgetting social security, as well as your employer's contribution to medicare and social security (Which is the same as your own). They get deducted from your paycheque (In both Canada, and the US) before you even see it. Which, for an income of $231,600/year ($11,600 of which get taken off your paycheque before you even see it), adds up to a total of $71,143. Meanwhile in Ontario, your total tax burden, for an income of $223,750 ($3,754 of which gets taken off your paycheque before you even see it), adds up to... $88,663. Of course, in California, your employer is also spending ~$20,000/year on your health insurance plan (And is asking you to pitch in ~$6,000). In Ontario, at that income level the province will bill you... $900/year for a health premium. The rest of your health care costs[1] come out of the regular taxes you pay. ...And if we add all that to the math, you'll discover that the Canadian takes home a bigger portion of their paycheque then their American equivalent. [1] Okay, I'm also missing vision and dental, which are part of the $20,000/year employer part of your health plan, but are not covered by the province of Ontario. The Canadian would have to pitch in a bit of cash for that.
    - david-gpu 6y ago
      If we are going into such detail then we also need to take into account differing currencies, cost of living, salary distribution, purchasing power parity, sales taxes, property taxes, tax credits, etc. Just as an example, my salary in the US would be 30-40% higher and denominated in a currency that is worth 34% dollar for dollar.
      - vkou 6y ago
        Sales tax in Ontario is 13%, sales tax in Cali is 7%. Property tax in Toronto is 0.61%, property tax in San Francisco is 1.18% [1]. The net burden of these non-payroll taxes is pretty similar. [1] Assuming you're one of those suckers that isn't laughing all the way to the bank, thanks to the mindboggling piece of legislature called 'Proposition 13'.
    - deleted 6y ago
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    - deleted 6y ago
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cperciva 6y ago
Indeed. If you have 4 kids in BC, your effective marginal tax rate could be as high as 33% (Federal) + 20.5% (BC) + 1.95% (BC health tax) + 3.0% (pharmacare deductible) + 9.5% (Canada child benefit clawback) = 67.95%.
- Hello71 6y ago
  except it's impossible to simultaneously pay those rates on a marginal basis. according to https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/tax-rates https://www2.gov.bc.ca/gov/content/taxes/income-taxes/person..., the 20.5% rate only applies to income over $220,000 (which, even by US standards is in the top 3%), while according to https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-we-calculate-your-ccb.html https://www.canada.ca/en/revenue-agency/services/child-famil..., the CCB clawback only applies between $31,712 and $68,707. therefore, while you can simultaneously pay all these taxes, I don't think it's accurate to call it a marginal rate.
  - cperciva 6y ago
    The CCB clawback between $31,712 and $68,707 of income is at a higher rate (23% if you have 4+ kids). Above $68,707 the clawback is the 9.5% I quoted.
    - Hello71 6y ago
      sorry, I was on mobile and didn't check closely enough. it's worth noting that the maximum clawback is 100%, so in order to have any benefit to claw back at $220k, you would need to have at least four children under 18 years of age. if we assume that of the BC families receiving at least $1 in CCB, the probabilities of having four or more children and earning over $200k are uncorrelated (I would hazard a guess that the actual correlation is almost certainly negative), then the number of families paying 20.5% provincial income tax and 9.5% clawback is probably around 52. in order to also be paying the 3% pharmacare deductible, you'd also need to be spending at least $7k per year on medical expenses, as well as making less than $316k before taxes. on the whole, I would say that paying that much medical expenses would make someone disinclined to have (more) children. in conclusion, while I was wrong to say that it's impossible to pay all those taxes simultaneously and marginally, it seems highly unlikely and I doubt that anybody in BC actually pays that marginal rate. https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/income-statistics-gst-hst-statistics/canada-child-benefit-statistics/canada-child-benefit-statistics-2017-tax-year.html https://www.canada.ca/en/revenue-agency/programs/about-canad...

Context for non-Canadians: income above CAD$220K has a marginal tax rate around 53% in Ontario [0]. It's similar in other provinces. [0] https://www.taxtips.ca/taxrates/on.htm https://www.taxtips.ca/taxrates/on.htm

jonas21 6y ago
To be fair, if you live in California and make $220K/yr, your marginal tax rate on salary is 46% (35% federal + 9.3% state + 1.45% medicare)
- verst 6y ago
  Tax rate is 42% for all income above 55,960 Euros in Germany. That doesn't even include a few other taxes you might likely have to pay. Top tax bracket for the income tax portion is 45%.
  - klipt 6y ago
    But I assume housing is more affordable than the $2 million houses in Silicon Valley.
    - verst 6y ago
      Wages in Germany are much lower. Owning a home in a city like Berlin doesn't seem a lot easier than in SF. People are fine doing long term rentals with rent control. Not everything is about Silicon Valley. You can move away to afford better housing. That's what I did.
- stickfigure 6y ago
  Plus a 9% sales tax, and high property taxes if you bought in recently.
  - ec109685 6y ago
    California property taxes aren’t that high, even for new owners compared to other states.
    - cgriswald 6y ago
      In this case the relevant metric is property tax as a percentage of income rather than as a percentage of property value. On average, California is somewhere around 15th in the nation, but there's a sharp divide between new owners and grandfathered owners.
- PaulDavisThe1st 6y ago
  also, as ever, we have to note, since so many people do not understand it, you do NOT pay 35% federal tax on your income, you only pay 35% of your income above a certain level.
  - seangrogg 6y ago
    Marginal tax rate (which is specified) is at least how much you'd owe on every dollar of income after. Average tax rate is how much tax you actually paid against income.
    - PaulDavisThe1st 6y ago
      Most people (particularly in the US) do not understand this. In addition, the actual placement of the tax makes a great deal of difference. Owing 35% on income above $35k is very different than owing 35% on income above $220k. Very people know where the tax brackets are.
- jandrese 6y ago
  Your tax rate is actually around 57% because you forgot to include your medical insurance of around 11% at that salary for a family of 5. Roughly $2,000/month. If you are comparing tax rates with first world countries you need to include your health insurance costs or the results will be skewed. Luckily with a salary in the top 2% nationally you can afford insurance. The same can not be said of people who are not rich.
  - ibeckermayer 6y ago
    Why would you choose family of 5 as your point of reference? That’s very uncommon in tech-California.
  - AdrianB1 6y ago
    Is the health insurance cost a percentage of your income? I thought it is a fixed amount based on what the insurance is covering.
    - jcrawfordor 6y ago
      Little bit of both. It's a fixed rate, but a lot of employers use a "tier" system where the rate depends on your income.
    - jandrese 6y ago
      It's harder on the poor. The percentage figures will vary based on your income level. Luckily the OP chose an income level in the top 2% of all Americans which made it a somewhat reasonable level. This was also an individual plan bought on a healthcare exchange. Large employers have a stronger negotiating position and can get somewhat better rates, but in the end you're still basically paying a tax and it is disingenuous to compare tax rates with countries that provide socialized healthcare with their taxes and not include the cost of healthcare coverage in the States.
      - AdrianB1 6y ago
        It is not fair to compare taxes between countries with and without healthcare, but it is almost impossible to compare otherwise. For example USA has huge prices and excellent services compared to almost any other country, in my country (Romania, Europe) the socialized healthcare is so bad many people have a private insurance, I have 2 private insurances through my employer and I still pay out of the pocket about half of everything I get (100% of dental care is out of the pocket, most consultations are covered by the private plan, most treatments are out of the pocket).
- ec109685 6y ago
  Marginal tax rate is a weird way to look at it when you list a specific salary. You should use the actual effective tax rate that person would pay, which is 34.8%, fico, state and federal.
  - refurb 6y ago
    It's helpful for people making high incomes, but yes, you're correct, it doesn't provide much clarity on the actual taxes paid. At $220,000 CAD, the tax rate in BC (one of the lowest in Canada other than Alberta) would be 35.8%. In Quebec, it would be 42%.
- vkou 6y ago
  You're also forgetting social security, as well as your employer's contribution to medicare and social security (Which is the same as your own). They get deducted from your paycheque (In both Canada, and the US) before you even see it. Which, for an income of $231,600/year ($11,600 of which get taken off your paycheque before you even see it), adds up to a total of $71,143. Meanwhile in Ontario, your total tax burden, for an income of $223,750 ($3,754 of which gets taken off your paycheque before you even see it), adds up to... $88,663. Of course, in California, your employer is also spending ~$20,000/year on your health insurance plan (And is asking you to pitch in ~$6,000). In Ontario, at that income level the province will bill you... $900/year for a health premium. The rest of your health care costs[1] come out of the regular taxes you pay. ...And if we add all that to the math, you'll discover that the Canadian takes home a bigger portion of their paycheque then their American equivalent. [1] Okay, I'm also missing vision and dental, which are part of the $20,000/year employer part of your health plan, but are not covered by the province of Ontario. The Canadian would have to pitch in a bit of cash for that.
  - david-gpu 6y ago
    If we are going into such detail then we also need to take into account differing currencies, cost of living, salary distribution, purchasing power parity, sales taxes, property taxes, tax credits, etc. Just as an example, my salary in the US would be 30-40% higher and denominated in a currency that is worth 34% dollar for dollar.
    - vkou 6y ago
      Sales tax in Ontario is 13%, sales tax in Cali is 7%. Property tax in Toronto is 0.61%, property tax in San Francisco is 1.18% [1]. The net burden of these non-payroll taxes is pretty similar. [1] Assuming you're one of those suckers that isn't laughing all the way to the bank, thanks to the mindboggling piece of legislature called 'Proposition 13'.
  - deleted 6y ago
    [deleted]
  - deleted 6y ago
    [deleted]

cperciva 6y ago

Indeed. If you have 4 kids in BC, your effective marginal tax rate could be as high as 33% (Federal) + 20.5% (BC) + 1.95% (BC health tax) + 3.0% (pharmacare deductible) + 9.5% (Canada child benefit clawback) = 67.95%.

Hello71 6y ago
except it's impossible to simultaneously pay those rates on a marginal basis. according to https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/tax-rates https://www2.gov.bc.ca/gov/content/taxes/income-taxes/person..., the 20.5% rate only applies to income over $220,000 (which, even by US standards is in the top 3%), while according to https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-we-calculate-your-ccb.html https://www.canada.ca/en/revenue-agency/services/child-famil..., the CCB clawback only applies between $31,712 and $68,707. therefore, while you can simultaneously pay all these taxes, I don't think it's accurate to call it a marginal rate.
- cperciva 6y ago
  The CCB clawback between $31,712 and $68,707 of income is at a higher rate (23% if you have 4+ kids). Above $68,707 the clawback is the 9.5% I quoted.
  - Hello71 6y ago
    sorry, I was on mobile and didn't check closely enough. it's worth noting that the maximum clawback is 100%, so in order to have any benefit to claw back at $220k, you would need to have at least four children under 18 years of age. if we assume that of the BC families receiving at least $1 in CCB, the probabilities of having four or more children and earning over $200k are uncorrelated (I would hazard a guess that the actual correlation is almost certainly negative), then the number of families paying 20.5% provincial income tax and 9.5% clawback is probably around 52. in order to also be paying the 3% pharmacare deductible, you'd also need to be spending at least $7k per year on medical expenses, as well as making less than $316k before taxes. on the whole, I would say that paying that much medical expenses would make someone disinclined to have (more) children. in conclusion, while I was wrong to say that it's impossible to pay all those taxes simultaneously and marginally, it seems highly unlikely and I doubt that anybody in BC actually pays that marginal rate. https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/income-statistics-gst-hst-statistics/canada-child-benefit-statistics/canada-child-benefit-statistics-2017-tax-year.html https://www.canada.ca/en/revenue-agency/programs/about-canad...