We actually pay less in taxes for our healthcare than the US does but OK.
We pay a payroll tax for Medicare (health insurance for old age) of 1.45%. I am not aware of any other taxes for healthcare in the US.
But let's compare Canadian income taxes to American income taxes.
Let's assume $100,000 income in American dollars, so roughly $122,000 Canadian.
In America, married, filing jointly, there is a $25,100 standard deduction, so that leaves only $74,900. 0% tax on the first $25,100.
Then we have 10% tax up to the next $19,900. Tax = $1990 on the first $45,000 (25,100 +19,900) of income.
Then we have a 12% tax on the next $61,100, so that fills up all of the remaining money. $100k-$45k= $55k. So 12% of $55k = $6,600
6600 +1990 =
$8590
This dramatically
overstates what is paid by most Americans at that income level, however, due to above the line deductions like student loan interest and tax credits for children and deductions for money saved in 401(k) and IRA. The retirement contributions alone could easily a $30,000 reduction in income, lowering that tax bill by $3600 (leaving only $4990 for a total federal income tax bill). Add a few kids, and many American families pay no federal income tax whatsoever on that income. To give away a little personal information - I expect a $9600 federal child tax credit for 2021, so
plug that into the above and you see that the income tax burden is not very high in the US unless you have a
very high income.
Now, Canada.
We start with the exact same income, which is $122,000 Canadian.
You have a basic personal amount of $11,474 plus another one for the province, I picked Alberta, $18,450. These do not get added together, but are a deduction against each separate tax system.
So federal income is now $110,526 (0% tax below that)
Alberta income is now $103,550 (0% tax below that)
Federal
15% on the first $49,020
20.5% on 49,020 up to $98,040
26% on 98,040 up to our hypothetical income.
Province (again, picked on at random, these will be different)
Additional 10% up to our income level.
So, the math. 15% up to $49,020 is $7353. We are almost already up to the American's total tax load on a much lower income level.
20.5% of 49,020 to 98,040, another $10,049.10.
And the remaining income taxed at 26% = $3,246.36.
Federal $3246 + 10,049 + 7353 = $14,155
Then we have provincial income tax of 10% = $10,355.
So the exact same income pays income tax of
$24,510 for the pleasure of living in Canada, whereas that income in the US pays a maximum of
$8590 but perhaps down to $0 depending upon circumstances, which for many persons are very real circumstances. It would be a rare married couple that pays the full $8590.
I left out US state income tax. We have 50 states. In the US, some states have income tax, some don't. My state does, but we are talking about a couple / few thousand a year.
Canadians, please fill in some blanks for me. Do you have other taxes? E.g., we have a payroll tax here that mostly caps at $141,000 of payroll income. It does not apply at all to non payroll income (like profits).
Does your "basic personal amount" double if you are married?
Do kids get you a tax credit?
Sorry for asking all these things, but I did not wish to invest the time to become an expert on Canadian income taxes. It took long enough just to put the above together.
Most folks do not pay attention to how brackets work. As a result, most Americans WAY overestimate how much they pay in federal income taxes. As you can see from the above, the effective rate for an American family i
s in single digits at $100,000 of income, no matter what his situation with other deductions and credits. It could easily be zero. Most Americans (90%+) are not aware of this and react violently when you try to explain it.
Please change anything you need to or inform me about things I have not asked about that raise or lower that tax burden in Canada. I did the best I could with what I had.
