Canada's favorite tax haven? The U.S.A.

The Canadian Press,AP Photo/Ryan Remiorz

(MoneyWatch) Federal income taxes are in the spotlight again, thanks to expiring tax breaks that President Obama wants to take away from the well-heeled. Given the heated debate, you would imagine that Americans pay some of the highest taxes in the world.

But don't tell that to a Canadian. Our northern neighbors are increasingly considering the U.S. as the world's best tax haven.

"It's a bit of a retirement dream for many Canadians to live in a sunny area where there's no snow and the taxes are low," says Robert Keats, a certified financial planner in both Canada and the U.S. and author of "Take Your Money and Drive. Canadian's Best Tax Haven: The U.S."

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Thousands of Canadians are buying houses in California, Florida, and Arizona, he says. That trend is being fueled by a strong Canadian dollar and a weak U.S. real estate market. But the biggest draw of the U.S. is tax rates that Canadians consider remarkably low.

To be sure, the top U.S. tax rate is currently 35 percent, and most states add on their own tax levies, too. You'll pay sales taxes when you buy things -- in California that adds more than 8 percent to the cost of retail goods -- and you pay property taxes ranging from 1- 2 percent of your property values, depending where you live.

But that's chicken feed compared to what the average Canadian pays. "Canadians are taxed at much higher rates in almost every respect," Keats says.

First, American couples don't hit the highest tax brackets until they earn roughly $400,000 a year. Canadians enter the highest tax bracket with a quarter of that annual income, at roughly $100,000. And that top bracket consumes 50 percent of income, Keats says. Even though high-tax states in the U.S. add a substantial income tax levy onto your federal bill, state taxes are deductible. So even California's substantial 9.3 percent state tax doesn't bring Californians' combined bracket near Canada's 50 percent.  

Sales taxes are also vastly higher  in Canada. Not only are U.S. sales taxes typically less than 10 percent, they're only levied on tangible goods like clothing. Food and services aren't taxed. In Canada, a 5 percent national sales tax adds to territorial levies, which are imposed on all goods and services, boosting the cost of everything from clothing to car repairs by 13-15 percent, Keats says. 

Canadian property tax rates are roughly comparable to what they are in the U.S. But in the states they're not deductible from federal taxes, so the bottom line cost is significantly more.

And yet that's not the only reason why the U.S. is Canada's best tax haven, Keats says.

A 70-year-old tax treaty between the U.S. and Canada allows people emigrating from Canada an even better tax rate that people who have lived here all their lives. If you take your million-dollar Canadian retirement plan to America, you'll pay just 15 percent, or $150,000, in tax on it as you withdraw your savings, Keats notes. In Canada, you'd pay $500,000.

Better yet, because of the clear, simple rules established by that same tax treaty, Canadian tax authorities won't classify this strategy a tax dodge. If you'd moved to a traditional tax haven like the Cayman Islands, the rules aren't as clear. If you so much as go back to Canada for a wedding, you could have Canadian revenue agents (Canada's equivalent of the IRS) on your heels, attempting to levy taxes on your worldwide income.

Of course, none of this is particularly helpful for U.S. citizens wanting to cut their own tax bills. But perhaps the knowledge that things could be worse might make Americans feel a little better.

[oldweesie]

The population distribution in Canada is along lakes and rivers, such as the Great Lakes-St. Lawrence River system, the Red River, the North Saskatchewan River, the Fraser River. These waterways played a big roll as transportation routes during the Fur Trade era. It has nothing to do with proximity to a country that didn't even exist at the time.

[sjc_1]

Canadians have health care and college educations paid for by taxes. The U.S. has a go it alone sink or swim chaos greed market that is declining.

[Dancing-in-the-Streets]

EmpireGeorge______-- July 19, 2012 4:33 PM EDT
Dancing-in-the-Streets, I know anything related to the IRS, demands or audits, makes me unrelaxed......I really have a feeling you guys don't know you just released the kracken.
----------------
LOL! Come on George - "the kracken"/Healthcare for all - did not eat up Canada! Or England! Or Germany! did it? All free countries!
Besides I'm SURE Captain Jack Sparrow would be willing to fight it, if we need help! LOL!

[EmpireGeorge______--]

by erasmus111 July 19, 2012 4:25 PM EDT
"while the rest of the country is completely uninhabitable...."

That isn't true.
__________________

With the exception of native nanuvets or eskimos.

"Much of Canada is uninhabited and unnamed or thinly populated due to rugged terrain and a severe climate. Around 85 percent of the country is uninhabited"

As you can see from my original comment, most Canadians DO live close to the border, and the majority of the country is uninhabited....85% !

SO, how is what I said "untrue" ??

http://www.goingunder.org/ourwildestdreams/wp-content/uploads/2011/08/NA-From-Space-NASA.jpg

[EmpireGeorge______--]

Dancing, look at this image.....do you think what happens in that dark area north (canada) will work seamlessly in the lit-up area to the south (America) ? there is no comparison between the two countries.

http://www.goingunder.org/ourwildestdreams/wp-content/uploads/2011/08/NA-From-Space-NASA.jpg

[Dancing-in-the-Streets]

All you are comparing is the Geography George. There's people there and people here. More people here will need more healthcare, but they'll also have more money to pay in.

[EmpireGeorge______--]

ping pong ding dong

[Dancing-in-the-Streets]

LOL!

[EmpireGeorge______--]

would you purchase insurance from a company that "denied benefits" that they contracted to cover ??? of course not......how would they get new business if they regularly violted contracted coverage ? they wouldn't.....they don't "deny" coverage......the policy you purchased is denying you,because what you bought didn't cover it......not some CEO doing it.

[Dancing-in-the-Streets]

George we've been over this before. YOU have some top notch insurance policy and I'm happy for you!

Most Americans are not so lucky.
And whether you believe it or not - the insurance companies change the rules in the middle of the game - ALL THE TIME!!!

Now if I were allowed to SOMETIMES pay over $500 a month and when I felt like it and pay less or not at all when I felt like it - then we might be evenly matched. I'm expected to keep up my end of the deal - they need to be held to their end. And THAT is what the Healthcare Act begins to accomplish.

[EmpireGeorge______--]

Dancing-in-the-Streets, I will respectfully have to take your word for it, even though it goes against all my experiences and knowledge.

But I am just waiting for the real shoe to drop.....which is when the IRS starts questioning every America and asking them for their health insurance records, so they can deem if you quote "has a sufficient level of coverage".....when the average american sees how intrusive the IRS will be, with health audit, witholding tax returns, imposing the tax, and if you don't pay the tax, possible fine/imprisonment (according to the text of the bill, i read).

[EmpireGeorge______--]

by daffy64

In Canada, if you're sick, you're sick. You get treatment.
_______________

While being completely dependent on the Canadian federal government for your whole wellbeing.....I'm sorry, but Americans are a different breed, we believe in rugged individualism, of independence, self-reliance.......we reject dependency on a central government......so, while you see nothing wrong, as do many socialist liberal Americans......most Americans DO see something wrong with having their health in the hands of a bureaucrat in washington dC

[Dancing-in-the-Streets]

Yes we'd rather have our health in the hands of a Greedy CEO of an Insurance company, whose ONLY goal is to Make Money. : /

[EmpireGeorge______--]

He has a motive to keep you as a customer, or he'd be out of business quickly.....the government has no care about you.....they have no reason to please you, they have nobody to answer to.....compared to a business that has to care, and put out a good product or face going out of business......what is scary is the government has no fear of losing customers.

[EmpireGeorge______--]

by Dancing-in-the-Streets July 19, 2012 2:54 PM EDT

But there is something wrong with profitting off the suffering of others.
______________

Like Doctors ? and others in the medical profession, who "profit" off the suffering of others....even throw in the homocide detective, who "profits" off the suffering of others.

[Dancing-in-the-Streets]

I wasn't clear there. Let me try again.
There is something wrong with profitting off the suffering of others, if you are taking their money, and doing Nothing to alieviate the suffering. Like Insurance companies!
Doctors & those in the medical profession are at least doing something to help the patients!

[EmpireGeorge______--]

Insurance companies do nothing ? they would be out of business very quickly.....what they do, is pay for your huge operation, while you have just paid a tiny premium....while others pay premiums and need no operation......they cover the costs of medical treatment and expenses.....is what they do for profit.....did you think they just take money and do nothing ??? wow, you cannucks disappoint me.

[daffy64]

If living in "socialist" Canada makes you poor, why are a record number of Canadian millionaires being created?

And why is the economy in "non-socialist" USA so bad that Canadians are able to afford land that Americans can't?

Seems like "socialism" works after all.

[Dancing-in-the-Streets]

Fellow Americans - instead of being defensive and jealous when you read the above comment - Try thinking to yourself, what are they doing right that we aren't doing? We could learn something from them!

[EmpireGeorge______--]

Dancing-in-the-Streets, let's start by saying the two countries are not to be compared.....they have a very small total population, those populations are centralized in certain areas of the country (near our border) while the rest of the country is completely uninhabitable....they have but a fraction of our total population, so what they do, is not just easily applied here......we have a free and independent citizens, they are socialist subjects of the queen of England ......so there are stark differences, in countries, and in health systems.

[daffy64]

by ppaulville July 18, 2012 5:02 PM EDT
My wife and I honeymooned in Victoria, B.C., and rode bikes through a part of town with lots of big, older homes. We asked a pedestrian who owned the houses. His answer? "They were private homes until the owners were taxed out of them. They're all apartments now, every one of them." Is there anyone besides Obama who thinks bad healthcare (I know a lot of Canadians and they all come to the U.S. for important procedures) is worth having to be taxed out of your home and surrender half your income to the state?
Reply to this comment
by erasmus111 July 18, 2012 5:35 PM EDT
It's amazing the crap you Americans come up with. Some larger homes may be apartments now, but it isn't because the owners were taxed out of them. Hahahahaha! There are many large homes in Vancouver and other cities and I can assure you that most of them haven't been made into apartments.

And as for the medical procedures, very few go to the U.S. to have them done. Only the rich snots do because they think they are better than everyone else and can't wait a few weeks to have it done. And of course if it was a matter of life and death, they wouldn't have to wait any amount of time. No one in their right mind would go to the U.S. to get anything done. The amount Americans have to pay for their healthcare is CRIMINAL.

_

Right on, Erasmus. I know of no Canadians who "flee" south to get health care. It's fine here. It's just rich line-jumping hypochondriacs who go to the States. There was a story in the news of a woman in Canada who couldn't get care for her "brain cancer" and had to go to the States.

Then it turned out it was diagnosed (rightly) as a harmless non-malignant lump and she was just a paranoid person who couldn't stand waiting a month to get it removed for free.

Sigh.

[EmpireGeorge______--]

erasmus111
and can't wait a few weeks to have it done.

by daffy64 July 19, 2012 2:50 PM EDT
person who couldn't stand waiting a month
_______________

Stand in line.....for a month

[Dancing-in-the-Streets]

Seriously George! Surgeries here aren't exactly done on the spot either. They have to be scheduled here too, unless its an emergency.