Posts Tagged ‘Tax’

My husband and I recently moved to the Corvallis, OR from Vancouver, BC. Everyone was happy for our new start and one of the things I constantly heard was that it would be cheaper for us.  All those thousands of cross border shoppers propping up Washington sales registers  can’t all be wrong, right?

Well, never a person to take common wisdom for fact, I thought I should run some numbers for our friends on both sides of the border.

First, we will assume a gross (before taxes) income of $50,000.  We will assume that the currency exchange rate is at par which is where it has hovered for most of the past few years.  This income is at a good average level, an easy even number and is nice because it doesn’t fall in either the lowest tax bracket or the highest.  For comparison, the median income for both the cities are:

  • Vancouver BC (2009) was $67550 data from Statistics Canada
  • Corvallis, OR (2011) was $74200 data from HUD

One reason that many Canadians assume that the US is cheaper is the often heard mantra that the US has lower taxes.  I don’t know how many times I’ve been told by our friends that Oregon has no sales tax and that it will save us a bundle. It seems to be the number one thing Canadians know about Oregon.  Of course, just because Oregon doesn’t have sales taxes doesn’t mean it doesn’t have taxes, there are state and federal income taxes and payroll taxes.

So here’s how $50,000 gets taxed on federal and state/provincial taxes.

To estimate the tax paid in BC I used the E&Y tax estimator which assumes no deductions. For an income of $50,000 in BC you end up with a tax payable of $8,847. That’s an average income tax rate of 17.69%. For the US taxes I use the take-home-pay calculator on calculator.net and tax payable for the year $8,981 assuming 2 deductions (I been told that’s average) or average rate of 17.96%.

Of course the actual tax rate could vary dramatically from the above given various deductions, but for simplicity’s sake and to make a fair comparison we assume that there are not any other deductions.

Then there are the social service payments – Canada Pension Plan/Social Security, Employment Insurance (as unemployment benefits are called in Canada) and Medicare etc.  After taking these into consideration this is how the two countries stack up for income taxes:

Canada US
Before tax income 50000 50000
tax payable 8847 8981.28
CPP/Social Security 2306.7 2094.12
EI 839.97
Medicare Tax 723
Worker’s Comp 29.16
After taxes and deductions 38,006.33 38,172.44

As you can see there isn’t actually that much difference difference and that it is actually a little bit more expensive to live in US.  In part II I will look at the fixed cost of living differences between these two cities and in part III the impact of the sales taxes.

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