Our Citizenship, Paid For By Our Taxes

Brandon Sun, August 26, 2007 - David McConkey

“Ask not what your country can do for you,” U.S. President John F. Kennedy famously said in 1961, “ask what you can do for your country.”

Nowadays, somewhat regrettably, we are more likely to ask about the monetary costs and benefits of our citizenship.

Everyone in Canada pays the same federal income taxes. But citizens in different provinces pay different provincial income taxes. In fact, in recent years, the provinces have been forging quite different tax regimes.

To explore this idea further, I compared provincial taxes for three income scenarios: lower, middle, and higher. I used the computer software system at Liberty Tax Service in Brandon. With the help of Sean Blair, Operations Manager, I looked at provincial taxes (2006) for Manitoba and our closest provincial competitors: British Columbia, Alberta, Saskatchewan, and Ontario.

In Table A (see below), I ranked from the lowest to the highest amounts, what a person earning $20,000 per year (or $9.60 / hour) would pay in provincial income taxes.

Compare that to Table B. A family earning $65,000 per year, which is about the national average, would pay these provincial taxes (assumes one spouse earning, one spouse staying at home, and two children aged eight and nine years old).

If you’re doing really well, check Table C. A person earning $250,000 per year would pay those provincial taxes.

These three scenarios obviously simplify many complexities. As another example, Blair and I looked at a retired senior citizen. In that case, annual income of about $14,000 from Old Age Security and the Canada Pension Plan would be at the threshold of starting to pay federal taxes. That taxpayer would be the best off in Manitoba as compared to the other four provinces.

For the working people in the three examples, however, Manitoba imposes the highest taxes. This could be a factor for those considering where to work and live. Every province is faced with the task of keeping people at home, and enticing others to move in.

“Manitoba has fallen behind the other Western provinces when it comes to personal income taxes,” points out Blair. “Manitoba is challenged to stay up with the others.”

Blair has even seen some people – particularly mobile single young people comparing Manitoba and Alberta – change their province of residence based on tax rates.

Of course, there are many factors determining where a person would choose to live. Four important ones which would usually trump taxes: availability of jobs, wage levels, affordability of housing, and overall quality of life. But the discrepancy in taxes could be a concern for long-term economic sustainability in Manitoba.

A person earning a good income should pay accordingly for the government services that they benefit from. And they do benefit. Business people make their money at least partly because of the infrastructure provided by government: from roads and police to the educated citizens who become workers and customers. Other people – such as teachers and civil servants - are actually paid directly by the government.

Doctors, for example, owe their living to government-funded Medicare. But they can move to another province. According to a recent story in the Brandon Sun, a new deal will raise the pay of Emergency Room physicians in Manitoba to some $300,000 per year - among the highest paid in the country. Was some of the increase needed to offset the higher taxes that a doctor is required to pay when they live here?

In addition, there are also a host of other government initiatives that come into play. Provinces set not only their income taxes, but also such rates as sales taxes, health premiums (a factor in some provinces like Alberta but not in others like Manitoba), Crown Corporation utility charges, and provincial auto insurance rates.

When I lived in Saskatchewan a number of years ago, I saw a newspaper advertisement during a provincial election that had a comprehensive comparison. The NDP prepared a chart with a hypothetical family, showing what its costs would be in every province in Canada: income taxes, sales taxes, health premiums, auto insurance, hydro costs, the works. The bottom line? The family did the best in NDP Saskatchewan.

I didn’t see a chart like that during the last Manitoba election: neither by the NDP showing that its overall polices were the best, nor by the Conservatives or Liberals showing that they had a better plan.

That kind of analysis would be fun for those of us who like looking at lists of numbers. As well, it might be interesting for people choosing where to live and work in terms of comparative citizenship.

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Table A
Ranked from the lowest to the highest amounts, a person earning $20,000 per year ($9.60 / hour) would pay in provincial income taxes:

    British Columbia        $366
    Alberta                      $391
    Ontario                      $631
    Saskatchewan        $1,124
    Manitoba                $1,182

Table B
A family earning $65,000 per year, which is about the national average, would pay these provincial taxes (assumes one spouse earning, one spouse staying at home, and two children aged eight and nine years old):

    Alberta                    $3,256
    British Columbia      $3,746
    Ontario                    $4,373
    Saskatchewan         $4,928
    Manitoba                 $5,743

Table C
A person earning $250,000 per year would pay these provincial taxes:

    Alberta                   $23,246
    British Columbia     $30,796
    Saskatchewan        $33,366
    Ontario                   $36,896
    Manitoba                $39,040

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