Trudeau 'revenue neutral' tax changes - not even close

[hitops]

http://business.financialpost.com/news/economy/the-tax-effect-how-a-revenue-neutral-move-will-wind-up-costing-billions-and-could-push-top-talent-to-seek-work-south-of-the-border\

Is anyone actually surprised by this?

As far as the top skilled professionals leaving - I'm definitely tempted. I would earn around 2 - 2.5x when factoring in the exchange rate and Trudeau's plans.

Some might say, well go ahead we don't need people who think like that. Simultaneously, those people will want great care and no wait times, demonstrating possible early signs of schizophrenia.

Edited January 18, 2016 by hitops

[Derek 2.0]

As far as the top skilled professionals leaving - I'm definitely tempted.

It could be difficult unless you have/had a USD/Foreign Currency account with a considerable percentage of your assets/saving in USD......otherwise, with the current exchange rate, you'd take a huge haircut.

And of course, if you do, look to States without a State tax (Alaska, Texas, Florida, Washington, Nevada, South Dakota and Wyoming).

------------

Missing from the article (fixed link for you), which I think does touch on several important points, is the far more probable avenue for many moving their assets outside of Canada. One of the lowest risk vehicles, if you can, is to first set-up a full Canadian corporation (not a limited partnership), investing your own assets into it, and then create a US subsidiary, paying yourself limited dividends as income.........get a lawyer and look into it.

[msj]

As far as the top skilled professionals leaving - I'm definitely tempted. I would earn around 2 - 2.5x when factoring in the exchange rate and Trudeau's plans.

Just so we are clear on this. You are saying that you would make 100% to 150% more elsewhere.

But that is not enough to bring you over to the foreign side.

No, it is the 4% point increase in a tax rate that will do it.

Do I understand this correctly?

[hitops]

Just so we are clear on this. You are saying that you would make 100% to 150% more elsewhere.

But that is not enough to bring you over to the foreign side.

No, it is the 4% point increase in a tax rate that will do it.

Do I understand this correctly?

No other reasons help keep me here - proximity to extended family mainly. Also the modest headache of US exams, though not a huge deal in the end. But as the tax regime and general political climate become more acrimonious and demonizing to those who bust their butt to achieve the fruits of that....the busting becomes less appealing. At some point the calculation tips towards heading south.

But really this has nothing to do with me specifically. Highly educated, high performing people of all stripes will consider it. We have certainly lost many for those reasons in the past.

It could be difficult unless you have/had a USD/Foreign Currency account with a considerable percentage of your assets/saving in USD......otherwise, with the current exchange rate, you'd take a huge haircut.

And of course, if you do, look to States without a State tax (Alaska, Texas, Florida, Washington, Nevada, South Dakota and Wyoming).

Yes true if I wanted to transfer everything. I would probably just start earning there, and leave my CDN accounts in Canada for use when I'm visiting, or to help family etc. Being early in my career, most of my earning potential is ahead.

You are quite right I would favor a place with a reasonable tax burden. I have heard however that sometimes a low or absent state tax can mean a high property tax.

Edited January 18, 2016 by hitops

[bush_cheney2004]

... We have seen this show before in Canadian history, as we all know.

True...well paid Canadian skills have fled south to the United States for many decades. Do they get a medal for staying in Canada ?

[Derek 2.0]

Just so we are clear on this. You are saying that you would make 100% to 150% more elsewhere.

But that is not enough to bring you over to the foreign side.

No, it is the 4% point increase in a tax rate that will do it.

Do I understand this correctly?

I can't speak for hitops, but he could very well see a 100-150% increase in income if he's in an industry that has been devastated (or will be) by both Federal and Provincial policies in Canada versus the United States.

[PIK]

As O'learly said, most of his students tell him ,they are leaving for cali once they graduate.

[Derek 2.0]

Yes true if I wanted to transfer everything. I would probably just start earning there, and leave my CDN accounts in Canada for use when I'm visiting, or to help family etc. Being early in my career, most of my earning potential is ahead.

You don't need to transfer everything, just open an account with your current bank that deals in USD (currently though, you'd be raped on the exchange). Furthermore, depending on your field and ability to get a US work Visa, you could very well require putting more skin into the game.

You are quite right I would favor a place with a reasonable tax burden. I have heard however that sometimes a low or absent state tax can mean a high property tax.

Some without a doubt have higher county/property taxes, but this is often still offset by no State taxes. With that said, dependent on where you go, you could end up paying a premium for real estate if you plan to live in a larger city (where the work is of course)......of the above mentioned States without State taxes, Texas or Washington State offer the best balance between livability and work in a low tax jurisdiction (In my experienced based opinion)

[Derek 2.0]

As O'learly said, most of his students tell him ,they are leaving for cali once they graduate.

Which would be insane........California is Ontario will palm trees and nice weather.

[hitops]

When you try to provide everything to everyone, you wind up poor and unproductive. When you let the market provide things through pricing, you wind up much richer, with much more of everything for everyone. If I moved to the US, I would be providing my services to more people per unit time, and making more money. Not only would more people be served, but my consumption and that of my family would provide more dollars to more businesses and employees.

But to the liberal thinker, this is bad because it is bad when somebody succeeds and somebody else succeeds less. It would be better to earn less, help less people and buy fewer things, employing fewer people, circulating fewer dollars. Because even though poorer people are even poorer and less mobile in that scenario, at least the successful person is less successful. And that makes angry liberal-minded people feel a little better, I suppose.

Edited January 18, 2016 by hitops

[overthere]

True...well paid Canadian skills have fled south to the United States for many decades. Do they get a medal for staying in Canada ?

The IRS is much harsher on US expats than CRA is on CDN expats.

If you are a CDN citizen that is non resident, and in a country with a reciprocal tax treaty it can be quite profitable to become a non rsident. I know three couples that are residents of Mexico now, because by doing so they protect their welath which is significant for all three.

If you're still workig making , say, up to about $500k per year it might not be worthwhile to move, and might make earning that income much harder.. But if you are well off and want to legally protect investments...... IIRC Mexico has a nominal 15% income tax rate and no capital gains tax. They are one of the countries that wants rich people to live there.

[msj]

Also the modest headache of US exams, though not a huge deal in the end. But as the tax regime and general political climate become more acrimonious and demonizing to those who bust their butt to achieve the fruits of that....the busting becomes less appealing. At some point the calculation tips towards heading south.

I'm a tax accountant so I know about calculations tipping decisions.

But it is odd that a potential 100% increase in income isn't enough to tip you but a 4% point increase on a tax rate on a high tax bracket would be enough.

Just does not pass the smell test to me.

[-1=e^ipi]

As O'learly said, most of his students tell him ,they are leaving for cali once they graduate.

I find it interesting that so many demonize O'Leary as immoral or uncaring, but he is one of the few people showing concern about young people being unable to find proper employment (including people with STEM backgrounds).

From my perspective, the Ontario government is concentrating on making energy prices absurdly high and driving out manufacturing, tech and other industries, increasing debt and thus getting credit downgrades, banning internships, creating a bloated public service and spending money inefficiently; the Alberta government is concentrating on shutting down the main industry in that province, hiking corporate taxes and royalties, increasing debt and the public service, thus getting credit downgrades, and building 'feminism' in Alberta; the Quebec government is as always focused on having an inefficient tax structure, thus being a drain on everyone to the west of them, and being language fascists that go around trying to ban words like pasta; and the Federal government is focused on partying overseas, giving billions of dollars away to other countries, importing large amounts of refugees without thinking about the consequences or how to do it, blocking oil exports at every possibility, such as banning west coast oil tankers, ignoring problems from ISIS to the collapsing dollar while proclaiming Sunny Ways, hiring people based on what is between their legs and where their ancestors came from as opposed to merit, not supporting the tpp yet, and spending mass amounts of money under the guise of 'infrastructure spending' which will be poorly thought out and cause credit downgrades.

I've been thinking about leaving Canada for years, or at least going West (until the recent events in the West). If not due to the economic situation then due to other reasons such as that anti-freedom of speech culture and the discrimination against men. My current plan is to emigrate to either the USA or Australia, although doing that requires money and a job when I get there, but I have a plan to do so and leave this insane asylum of a country eventually. I'm sick of being in a limbo state between poor paying part time work and unemployment, how many more years is it supposed to last for? Would be nice to take an internship but I'm too poor and don't have supportive parents unlike most millennials that I know of. Even if I apply for a job at a freaking grocery store, they now require you go online and fill out a bunch of forms to ensure that you are 'diverse' enough. These downturns and lack of opportunity primarily affect graduating cohorts that are trying to enter the job market, but Trudeau doesn't care about us, only about the people who are married, already have a car, a house, good jobs, 'middle class', etc. I don't have a car or a smart phone, I don't take vacations, I don't go to movies, all I do with my money is buy food (ramen noodles are cheap) and pay rent.

Dismiss concerns about creating an environment where young skilled people leave if you want, especially right before a demographic collapse. Argentina used to be a rich country 100 years ago, then due to government it became a poor country and eventually defaulted on its debt; that's the path Canada is currently on.

Now that I think about it, I would have been better off doing a gender studies degree as opposed to doing things like maths, physics and economics. Because then I would be able to apply to one of those 6 figure jobs to build 'feminism' that Notley is creating. Though to do that I would have to join the cult of 'Social Justice' which is spreading through society like a cancer.

[cannuck]

Now that I think about it, I would have been better off doing a gender studies degree as opposed to doing things like maths, physics and economics. Because then I would be able to apply to one of those 6 figure jobs to build 'feminism' that Notley is creating. Though to do that I would have to join the cult of 'Social Justice' which is spreading through society like a cancer.

I think you have kind of missed the entire point of employment. If you even consider government as an employer, you are not likely to EVER contribute anything to anyone but yourself. There are endless employment opportunities for those who have bothered to look at the labour market, find where the need is greatest and NOT heavily dependent upon cyclical resource prices, train for that and be prepared to go to WORK, not show up expecting to be entitled to a free ride and a paycheque.

One of the companies I work with takes people into our department with either 2 year diplomas at tech school or engineering degrees as students to find out if they have any real ability to actually work. Those who do will NEVER have to look back for the rest of their lives. Usually, second year out of school, they are filing 6 digit tax returns (due to overtime). I have worked with some of the same people for over 20 years, but for the most part, it is very hard to KEEP people who are able to learn and work - as competitors and clients are constantly trying to poach them - regardless of what "the economy" is doing.

All you have to do is realize that the story your HS guidance counsellor gave you that you need to be Doctor Lawyer or Indian Chief to succeed was a line of BS. You just have to be prepared to be useful and productive, that is all.

[hitops]

Some without a doubt have higher county/property taxes, but this is often still offset by no State taxes. With that said, dependent on where you go, you could end up paying a premium for real estate if you plan to live in a larger city (where the work is of course)......of the above mentioned States without State taxes, Texas or Washington State offer the best balance between livability and work in a low tax jurisdiction (In my experienced based opinion)

To be honest I'd be perfectly happy living in the middle of nowhere, as long as I can get to work. One of the great things about the US is they have way more treatment centers in relatively rural areas. Cities in the US 1/3 the size of mine, have better facilities and treatment options.

[hitops]

I'm a tax accountant so I know about calculations tipping decisions.

But it is odd that a potential 100% increase in income isn't enough to tip you but a 4% point increase on a tax rate on a high tax bracket would be enough.

Just does not pass the smell test to me.

Our brain drain is historical fact whether or not you can smell it. Family is a powerful incentive, but at some point the calculation is overwhelming.

[Smallc]

Our brain drain is historical fact whether or not you can smell it. Family is a powerful incentive, but at some point the calculation is overwhelming.

That's true, but, there are a lot of negatives to living in American society, as well. One only has to visit to notice the difference in the level of violence, homelessness, poverty, etc. I'd rather have a few less rich people if it also means I can have a few less poor ones.

[hitops]

That's true, but, there are a lot of negatives to living in American society, as well. One only has to visit to notice the difference in the level of violence, homelessness, poverty, etc. I'd rather have a few less rich people if it also means I can have a few less poor ones.

Assuming the mean and median would be similar, I would agree. But history categorically demonstrates that the middle in the US has a lower cost of living and higher access to pretty much everything, than here. Comparing both in equivalent USD, the middle income American earns more and each USD equivalent earned goes much further. This has basically always been the case, except for the anomalous period 2-4 years ago when our dollar was puffed by oil.

Edited January 23, 2016 by hitops

[Smallc]

Assuming the mean and median would be similar, I would agree. But history categorically demonstrates that the middle in the US has a lower cost of living and higher access to pretty much everything, than here. Comparing both in equivalent USD, the middle income American earns more and each USD equivalent earned goes much further. This has basically always been the case, except for the anomalous period 2-4 years ago when our dollar was puffed by oil.

And the bottom in the US (the larger bottom) does worse in every conceivable way. Yes, it costs more to live here, just as it does in Europe. Our poor in Canada are better for it, even if our middle class does slightly less good, and our rich are less rich.

There are also things you're leaving out - the cost of health insurance, education, and non insured sick care are all much higher in the US.

[msj]

Our brain drain is historical fact whether or not you can smell it. Family is a powerful incentive, but at some point the calculation is overwhelming.

Yes, our brain drain makes perfect sense when someone can be making "100% to 150%" more outside of Canada.

What doesn't make sense is all this gnashing of teeth as if the 4% point increase is the final straw (FINAL STRAW!) to push someone over the edge.

That's just odd and doesn't pass the smell test on an individual basis.

IOW, I think you are exaggerating your own claim to be part of the brain drain for partisan political purposes rather than because you will ever come near to paying this new tax rate.

[Derek 2.0]

What doesn't make sense is all this gnashing of teeth as if the 4% point increase is the final straw (FINAL STRAW!) to push someone over the edge.

Why do you keep repeating the 4% increase..........You've mentioned you're an accountant, if Hitops lived here in BC and earned 200k, his combined Federal and Provincial income tax rate would be what? ~45%?

Versus, if he earned the same income and lived in Wyoming, without a State tax, thus falling into the IRS's federal 33% bracket........~12% of 200k is a fair bit of money......so much so, within a decade of living in Wyoming, with the tax savings alone, he could purchase an average home in the State capital of Casper........

The motivation of tax savings shouldn't be in question, more so the prospects of obtaining both a visa and employment.

[Derek 2.0]

To be honest I'd be perfectly happy living in the middle of nowhere, as long as I can get to work. One of the great things about the US is they have way more treatment centers in relatively rural areas. Cities in the US 1/3 the size of mine, have better facilities and treatment options.

Treatment centers for what? Employment or your own health needs? If the later, serious conditions could preclude you from obtaining a visa.

[Derek 2.0]

That's true, but, there are a lot of negatives to living in American society, as well. One only has to visit to notice the difference in the level of violence, homelessness, poverty, etc. I'd rather have a few less rich people if it also means I can have a few less poor ones.

Give it a rest........if hitops is earning 200k a year, he wouldn't be moving to Detroit to work in a Walmart

[msj]

Why do you keep repeating the 4% increase..........You've mentioned you're an accountant, if Hitops lived here in BC and earned 200k, his combined Federal and Provincial income tax rate would be what? ~45%?

The motivation of tax savings shouldn't be in question, more so the prospects of obtaining both a visa and employment.

I don't question anyone's motives about avoiding taxes although I will have a difference of opinion about paying more tax in BC versus Wyoming which, imo, is worth the premium.

No I am calling BS on this idea that he earns as much as he says he can earn as opposed to making things up because of partisan politics.

If one has not already been persuaded to go elsewhere because one can earn "100+%" more in income at already lower than Canada tax rates then I find it odd that now, all of a sudden, this 4 point increase is going to break the camels back.

[Derek 2.0]

There are also things you're leaving out - the cost of health insurance, education, and non insured sick care are all much higher in the US.

Again, assuming hitops was married and lived in British Columbia (earning over 200K) he would be paying nearly 3k a year for MSP and private insurance for extended medical/dental.......if he was making the same, and living in Wyoming, his private insurance (assuming he doesn't have a copay through his employer) with full coverage would cost him 8-9k annually......more than offset by just the 4% increase in Federal tax rates.....