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Kim G C Moody’s Musings – 1-1-1 Newsletter For January 3, 2024


Canada’s personal tax rates are too high.  I have written about that often.  There are numerous sources of data that consistently put Canada’s personal tax rates amongst the highest on Earth.  Yes, there countries with higher marginal personal rates than Canada but there are many more that are lower.  Most Canadians, however, are more often concerned about our largest and most important neighbour – the United States.

Why?  Well, there is a tremendous amount of personal and economic exchange between Canada and the U.S. and this has a direct and indirect impact on Canadians’ economic prosperity.  While Canada used to be the U.S.’s largest trading partner, it lost its top spot to China in recent years and the two countries have been jockeying for top spot ever since.  However, in 2023, Mexico has surpassed Canada and China has slipped below Canada.

The above is good perspective since Canada is often in a battle for skilled labor so as to help maintain its high standard of living. That skilled labor can include talent such as executives, engineers, trades people, and yes, even professional athletes. Canada is also in a battle for foreign investment to ensure it can create and maintain jobs through business expansion or the start-up of new businesses.

But can Canada effectively compete for skilled labor with its largest trading partner? While personal taxation is not the only factor in such competition, it certainly is an important one.  It is also well known that high personal tax rates are a drag on overall productivity and innovation.  Having fertile grounds for good productivity and innovation are well known attributes for success for job creators.  However, Canada’s GDP and productivity is dropping at an alarming rate. Not good.

So how does Canada compare to its southern neighbour when it comes to personal taxation?  In order to illustrate this, I created four random scenarios described below.  In all scenarios, it involves “Mom” and “Dad” who are married and have 2 very young kids.  For the U.S., I chose a high tax State (California) and a low tax State (Florida).  Similarly for the Canadian tax calculations, I chose a high tax province (Ontario) and a low tax province (Alberta).  Foreign currency differences were ignored since all I want to illustrate is the percentage of family taxation load in all cases. (Thanks to Peter Blomfield of Blomfield Tax for the US calculations and Jay Goodis of Tax Templates Inc. for the Canadian calculations).

The scenarios are as follows:

  • Scenario 1 – Mom and Dad each earn $65,000;
  • Scenario 2 – Mom and Dad each earn $150,000;
  • Scenario 3 – Mom earns $350,000 and Dad earns $150,000; and
  • Scenario 4 – Mom earns $1,000,000 and Dad earns $65,000.

The family taxation load results are as follows:

  • Scenario 1: California (both MFJ & MFS) – 10.57%; Florida (both MFJ & MFS) – 7.02%; Ontario – 16.72%; Alberta – 17.13%
  • Scenario 2: California (both MFJ & MFS) – 22.94%; Florida (both MFJ & MFS) – 16.2%; Ontario – 28.47%; Alberta – 26.35%
  • Scenario 3: California MFJ 30.03%, MFS 30.54%; Florida: MFJ 22.27%, MFS 22.77%; Ontario – 37.56%; Alberta – 33.68%
  • Scenario 4: California: MFJ 39.26%, MFS 41.96%; Florida: MFJ 30.15%, MFS 31.95%; Ontario – 47.31%; Alberta – 42.44%

As you can see, the U.S. family taxation load in all scenarios is materially less than that in Canada. It is quite a bit lower when looking at the Florida scenarios.

For example, under Scenario 1, the combined federal and state tax for a Florida resident is 9.7 percentage points lower than that of an Ontario resident. In Scenario 4, it is 17.16 percentage lower. These are very significant differences. Yes, one can nitpick and criticize these simple scenarios, but suffice it to say that one would have to create a very rare scenario to have the U.S. family taxation load be higher than that in Canada. For those interested in reviewing the calculations, you can review them here.

So, does higher personal taxation rates impact Canada’s ability to compete?  You bet it does.  And it also causes successful and productive people to consider leaving Canada.  When the Liberals came to power in 2015, one of the first things they did was to create a new top-end personal tax bracket effective for 2016 forward.  They introduced it with the awful speaking point of “we’re asking [high income earners] to pay just a little bit more”.  When one understands how much high-income earners already pay as a percentage of the whole, one can quickly appreciate why that phrase is offensive.

The high personal tax rates and the continued threat of more targeted increases (like the threat of the introduction of a wealth tax, capital gains inclusion rate increases and the recent horrible amendments to the alternative minimum tax) have also contributed to the significant amount of high-income earning Canadians to consider leaving Canada.

In my practice, the number of files that I have worked on in the past 5 years for Canadians that are exploring leaving (or have now left) Canada has far exceeded the cumulative number of files in my entire 30-year career to that point.  While the actual number of Canadians leaving Canada is small compared to the recent number of immigrants, it is the outsized amount of wealth, income and loss of future tax revenues associated with that small number of highly productiveCanadians that is scary.

Inevitably, whenever I lecture or write about my concerns about the number of successful Canadians exploring or actually leaving Canada, I get rebuttals (mostly from academics and government bureaucrats) that I’m exaggerating.  I’m not.  And I challenge such people to provide their evidence to rebut my practical experience.

Canada needs to compete strongly for skilled talent and help create a fertile ground for successful businesses.

Having a personal tax system that competes on a rate basis with that of the U.S. would be a great start.


One Comment About Leadership – Leaders Listen


One of the most impactful books I read early on in my career was Dale Carnegie’s 1936 classic “How to Win Friends and Influence People”.  How I came across the book is a bit of a humorous story.  I’ve told it often to people I know so here it goes.

In 1992, I was articling for my CA designation at a medium sized accounting firm in Calgary, AB.  I was a solid performer and learner and always got good performance reviews and I knew that if I kept working hard I would advance quickly in the firm.  However, 1992 was a poor economic year and a lot of firms were laying off articling students and new CA’s.  My firm was not immune from that.

One day, the managing partner – a stern fellow that most youngsters were afraid of – called me to his office.  “Kim, I’d like to speak with you.  Come to my office” he said sharply.  I had fleeting thoughts that I would be laid off.  But, instead, I got a stern lecture on how poorly I was treating the administrative staff.  “You realize you’re not their boss…right?” he told me.  “And they are much more valuable than you are”.  It took me years to realize what he was saying.  Indeed, I was hard on the administrative staff since I thought that I could get them to jump at my commands.  I mean, come on, I was one of the star new budding professionals.  Like I said, years later, I realized how correct he was.

But the next thing he told me startled me.  “Kim, have you ever heard of the book by Dale Carnegie, “How to Win Friends and Influence People?”.

No I haven’t heard of that book” I said.

“Well, do yourself a favor and read it” he said.

That night, I went home to my wife and told her the story.  “Can you believe he told me to buy that book?” I told her.  “I have lots of friends…how dare he tell me to try and get more friends”.

About a year later, my wife and I were enjoying a lazy Saturday afternoon and browsing books at Chapters.  Coincidentally, one of the books that was staring me in the face was the Dale Carnegie book.  I pulled it off the shelf, read the summary on the inside cover, started reading the first chapter and it gripped me.  I bought the book and quickly read it and then realized why my former boss told me to read the book.  I’ve since read it again about another 5 or so times.  It’s that good and classic.

To summarize the book in two words: respect; listen.  Since I’ve read it, I try hard to resist the urge to talk and instead to listen. I don’t always need to be the smartest person in the room.  Do you know people like that?  I do.  And they are not good leaders.

Good leaders, in my opinion, have figured out the proper balance of listening and knowing when to talk.  It’s not easy.  However, it’s my experience that you’ll learn more by listening than by talking.  In other words, be interested in who you are talking to.

If you haven’t read Dale Carnegie’s classic book, do yourself a favor and read it.  But don’t react to my recommendation like I did to my former boss.  😂


One Comment About Economics and Politics: Redistributive Policies


Our federal government is enamored with redistributive policies.  Recent examples include the possible implementation of a pharmacare program, dental program, “$10/day child care” and most recently the ridiculous idea of a “universal basic income” is being floated again.

All of these programs simply shift money from successful Canadians to less successful.  While I certainly agree that Canada needs to provide a safety net for its most vulnerable, there is a limit in how much money should be transferred to the less successful.  All of these programs either do or would cost billions and billions of dollars.  Frankly, Canada has a spending problem with a bloated number of civil servants.  But beyond that, there needs to be incentives for the successful to continue to be successful and take the risks to create businesses and provide jobs to many Canadians.  Without those incentives, who in their right mind would take the risks?

Canadians need to wake up to the dangers of expensive redistributive policies and programs that cause tax rates to remain high, government deficits to be out of control and cause disincentives for successful people and / or new entrepreneurs to take risks.


Bonus Comment – Quote From Dale Carnegie – Famous Author From His Classic Book “How to Win Friends and Influence People”


You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you.”


Yep, totally agree!

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