# Taxation comparison - BC vs AB?



## cannon_fodder

Does anyone know of a recent study comparing the taxation related cost of living in BC vs Alberta? I'm thinking of how income tax (especially on dividends and capital gains) and consumption taxes differ. 

I assume it would have to include several case studies to demonstrate the differences.


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## MoneyGal

You can build your own cases with tax software or using rates tables, like these:

http://www.taxtips.ca/marginaltaxrates.htm


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## I'm Howard

No Sales Tax in Ab.


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## Plugging Along

Also, the income tax rate is lower in AB.

We looked at changing our PR to our BC address. as there was a huge reduction for BC residents for property, but found that it was more beneficial to have it under our AB place for tax purposes.


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## steve41

Plugging Along said:


> Also, the income tax rate is lower in AB.


 I am not sure.... I did a quick 'die-broke at 95' run for a sixty year-old with 500K in his rrsp and 200K outside.

Living in AB returns him a $42,117 ATI. In BC he would attain $42,901. The sales tax is where the AB advantage shines.... on straight income tax, not so much. However, when you examine a higher HNWer, things turn around in AB's favour.


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## Plugging Along

I should have put a disclaimer that ur calculations where made based on our own situtation.

We did a calculation based on the following:
- Current incomes for spouse and I (both are in the 6 digits, so slightly higher incomes)
- Difference Cost of property tax in our place in BC if we were a resident, (no difference in our tax in the city we live in regardless of where the PR is)
- Amount of cross border shopping we do from WA, as there is no tax if you produce AB id

For us we found that the BC Property tax savings, was out weighed by the lower income tax savinges. We didn't really factor in no sales tax much, as we would still by living in AB.


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## fraser

From a straight taxable income perspective, take a look at this site:

http://lsminsurance.ca/calculators/canada/income-tax

We moved to Alberta from B.C. several years ago. What we noticed:

-incremental income tax rate at the top level is considerably less

-no provincial sales tax

-no health care premiums

-much lower auto insurance rates (about 33 percent less)

- less tax on beer and wine (and MUCH better selection...privatized)

-essentially no probate fees-we paid $5,800. tax/fees to probate an estate in BC last year. In Alberta the tax/fees would have been $135.

-less tax on gas

-property taxes where we live in Alberta are slightly higher...maybe by 10 percent (this is iffy as the values are slightly different)

I cannot speak to user fees. Did not notice much difference.

From an overall tax perspective, at our income tax level, we believe that we now pay considerably less tax than we paid in BC.


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## cannon_fodder

Thank you very much everyone. This is extremely helpful.


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## steve41

fraser said:


> From a straight taxable income perspective, take a look at this site:
> 
> http://lsminsurance.ca/calculators/canada/income-tax
> 
> We moved to Alberta from B.C. several years ago. What we noticed:
> 
> -incremental income tax rate at the top level is considerably less
> 
> -no provincial sales tax
> 
> -no health care premiums
> 
> -much lower auto insurance rates (about 33 percent less)
> 
> - less tax on beer and wine (and MUCH better selection...privatized)
> 
> -essentially no probate fees-we paid $5,800. tax/fees to probate an estate in BC last year. In Alberta the tax/fees would have been $135.
> 
> -less tax on gas
> 
> -property taxes where we live in Alberta are slightly higher...maybe by 10 percent (this is iffy as the values are slightly different)
> 
> I cannot speak to user fees. Did not notice much difference.
> 
> From an overall tax perspective, at our income tax level, we believe that we now pay considerably less tax than we paid in BC.


 Of course there's increased home heating cost, snow removal cost, clothing, mental health/counselling costs.... _"I don't like AB doc... I have suicidal thoughts.... what is wrong with me?"_, car winterizing expenses(rusting out), I could think of more.


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## kcowan

Snow tires, mosquitos, mandatory winter vacations. higher entertainment expenses, cracked skin and nails from dry heat, more gas used. I could go on...


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## fraser

We use all season tires (as do the police vehicles in Calgary oddly enough), yes we do winter vacations-as we did in BC, and a definate big YES to the dry skin! Forgot to add it the cost of moisurizers even though I tend to have a small stash of the comp. moisturizers that I get in hotels when I travel. As for mosquitos, lately we have had more issues with rabbits and politicians.

The biggest thing that we do not miss is BC poliitcs-of all stripes. YUK!

But on the serious side I have now retired. We may move within Canada. But, I expect to do some cashless excersing of stock options in 2012 and/or 2013. When we run the numbers, they tell us that we should stay in Alberta until after that time. Moving to Ontario or BC (our choices) would be far too costly from a tax perspective. The delta in each of those years will more than pay for two or three great vacations. Until then, I think I know every pothole in the road from Calgary to Vancouver. No rust on my 1997 Toyota as yet...and been here since 2001. Chipped winshields..yes the insurance company has paid for 1 so far on our personal vehicle and 3 on my former company cars. But to balance this off....no traffic jams on every bridge and no standstill traffic in those same places when a little moisture hits the bridge deck. And no toll roads/bridges either.

Yes to the cost of heating, forgot about that. But we do find that electricity is less but this could be a misperception.

We loved BC but Alberta is now home and is also a great place to live. But one bonus in moving to Alberta is that both of our children were easily able to accepted in, and have full course loads, in university and college. This has not been the case with a number of our friends whose children are in BC-particularly in the college environments.


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## steve41

fraser said:


> The biggest thing that we do not miss is BC poliitcs-of all stripes. YUK!


Keith mentioned that already.... AB doesn't have the free entertainment we get in BC.... politics.


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## fraser

We get that entertainment vicariously through the news outlets. There are a few here who are catching up as it were but still no where near the entertainment value that BC residents have, and have had for many years.

And as a former Quebec resident, I have a reasonably good grasp on what constitutes entertainment on the political scene. BC has them all beat-hands down.


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## kcowan

fraser said:


> We loved BC but Alberta is now home and is also a great place to live. But one bonus in moving to Alberta is that both of our children were easily able to accepted in, and have full course loads, in university and college. This has not been the case with a number of our friends whose children are in BC-particularly in the college environments.


We moved to AB when our kids were pre-school age, then 8 years later moved to Ontario. Both boys had a free ride for 1.5 years in Ontario while the school caught up with their knowledge. It did help them adjust socially though.

(I used to go around the house in shorts and bare feet when the temp was -40 because natural gas heating was so cheap. Not here in BC. Sweaters and slippers all year long...)


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## Square Root

Not familiar with BC rates but in Alberta max marginal rates on regular income and dividends in 2011 are 39% and about 17% respectively. These are much lower than Ontario and I suspect BC. There are web sites that compare these rates (Kcowan refers to them often). We have saved a ton of tax by moving to Alberta. Agree the weather could be better.


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## fraser

When I look at the after tax return on our investments, our net ROI is MUCH better in Alberta. I did a tax shelter in BC in 1999 that gave me some significant tax reductions for several years. As luck would have it the portion that I had to take back into income at the end of the cycle did not hit until we were in Alberta, ie lower tax rate. This tax saving helped move it from a mediocre/fair to a reasonable ROI.


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## fraser

When I look at the after tax return on our investments, our net ROI is better in Alberta. 

We did a tax shelter in BC in 1999 that gave us some significant tax reductions for several years. As luck would have it the portion that we had to take back into income at the end of the cycle did not hit until we were in Alberta, ie lower tax rate. This tax saving helped move it from a mediocre/fair to a reasonable ROI.


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## Karen

For people with high incomes, it's true that Alberta has a higher tax rate than BC, but for low and moderate income people, I believe BC's rates are significantly lower. The chart I have comparing combined federal and provincial rates for the whole country is for 2009 - I can't find a more recent one - but it shows the following rates. It's hard to compare exactly because BC has so many more rate thresholds than Alberta does, but it seems that if your income is up to $71,433, you'll pay less income tax in BC.

Alberta

On the first $38,832: 25%
Over $38,832 to $77,664: 32%
Over $77,664 to $126,264: 36%
Over $126,264: 39%

British Columbia

On the first $35,716: 20.06%
Over $35,716 to $38,832: 22.7%
Over $38,332 to $71,433: 29.7%
Over $71,433 to $77,664: 32.5%
Over $77,664 to $82,014: 36.5%
Over $82,014 to $99,588: 38.29%
Over $99,588 to $126,264: 40.7%
Over $126,264: 43.7%


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## sleek

Karen, in Alberta the personal exemption is at roughly $17k. That means a couple would not start paying provincial taxes until their income hits $34k. Even if they paid at a higher marginal tax rate, the average could be lower. Though a marginal analysis is usually the best, in this case, it would be more accurate to use the average rate.

As an Albertan, I know that a poor or retired couple living here and making $30k a year would pay no provincial taxes. What would they pay in BC? I believe your exemption level is at around $10k. That means the BC couple would pay provincial taxes on the last $10k of earnings as opposed to the Alberta couple who would pay nothing.


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## steve41

Here are two runs..... same 35 yearold, just starting out, earning $75K, dying broke at age 95.
In AB this guy will net $46,845 In BC he will net $48,172 annually. 5% rate of growth (nominal), 2% inflation.

AB guy
BC guy


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## andrewf

A girl I knew in university, who was from Regina, always complained about how humid it was in Ontario, even during the winter. Chapped skin and cracking nails seems worse than frizzy hair, but to each their own.


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## steve41

I'm on a roll here.... lets say that our BC guy spent 1/2 his after tax income on items that were provincially sales taxable. (groceries for example, don't get taxed) 

Our BC guy would enjoy $48,172/(1.025) adjusted for sales tax. That is $46,997 compared to ABs $46,885. This is counter to what we always assumed about the 'AB advantage'. <flack jacket on>

AB guy
BC guy


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## sleek

steve41, you can run a quick analysis here to quickly see the difference between taxes paid at various levels of income. Enter in a level of income and switch between AB and BC. Though you are better off in BC at higher levels of income, we seem to shield low income people more in Alberta. Which is kind of weird considering BC is always touted as a "socialist" province.

But anyway, you need a higher level of after-tax income in BC because of the PST. Also to pay the mortgage on the million dollar crack shacks you call homes. Seriously, what are you guys smoking over there?

When you hear of families paying 70% or more of their income on house payments, how do they cover the rest of the bills? Are they burning through their savings because I don't know how to make the math add up. Especially when you consider that banks use a 32% GDS and 40% TDS ratio to calculate a limit to housing affordability.

To be complete, an analysis should look at both income and cost of living.


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## steve41

Same study, except that instead of earning $75K, our guy earns $25K. He is still better off in BC. But only just.

AB guy
BC guy

BTW, no one forces you to live in Vancouver.... you can live in BC, but outside Vancouver. My guess is that real estate prices in Kamloops and Lethbridge might be similar. You can wear your shitkickers, drive a pickup truck, and freeze your *** off in either city.


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## Square Root

I'm a little confused. Isn't the max marg rate in BC about 3-4% higher than Alberta? For high earners doesn't that plus the lack of PST make Alberta the place to be?


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## steve41

Here is what I use, courtesy of the feds. (  Jan T4127 publication) This document comes out every Jan 1 and July 1, and is targetted to payroll programmers. Page 8 has the BC & AB rules. Also, the lack of a provincial sales tax in AB is a hands-down advantage, the income tax advantage seems to be geared to the HNWers.


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## cannon_fodder

This isn't as straightforward as I had expected. And from a weather perspective it seems I can't find something in AB similar to the Okanagan valley of BC. 

Steve your numbers Were helpful as I'm hoping for a couple each earning about $150k in capital gains annually in retirement at the maximum at age 50.


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## fraser

...not to mention gas at the pumps (about 15-20 percent less), NO provincial health insurance premiums, and (for us at least) a decrease of about 25-30 percent from what we paid to ICBC on each of two vehicles. So, take those dollar savings and gross them up by the tax rate in BC to see exactly what the before tax equivilants are.

At one time, those dopes in Victoria were actually asking the Costco stores close to the border to provide specifics on what BC Costco members were buying tax free in Alberta. They wanted to find a way to collect PST from them...there were/are lots of big ticket items (and high end jewelry) going out the doors and into pickup trucks. The answer, or course, was a resounding 'buzz off and go away'.


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## Charlie

On up to about $120K taxable income, there's no income tax advantage in AB vs BC. Your couple is looking at about $75K taxable income each.

Lots of comments already on other taxes and costs -- but other then provincial health insurance ($110/mo for a family of 2), I find exposure to those are more a function of lifestyle. And $1320/yr on an income of about $300K is really a rounding error in this analysis . 

My 'living' costs in Vancouver are much less then they were in Calgary [excluding the cost of buying a house]. Lower property taxes, one car vs two, lower utilities, less spending. But that's just us. "Cost of Living" is so individual, that general measures, while meaningful and interesting, don't necessarily apply to specific situations. 

I suspect the capital hit on buying a place in Vancouver/Victoria/Kelowna may have a greater impact then any sales tax / auto/health insurance variables. And that's offset by the desirability (or not) of living in those higher real estate cost places.


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## Square Root

fraser said:


> ...not to mention gas at the pumps (about 15-20 percent less), NO provincial health insurance premiums, and (for us at least) a decrease of about 25-30 percent from what we paid to ICBC on each of two vehicles. So, take those dollar savings and gross them up by the tax rate in BC to see exactly what the before tax equivilants are.
> 
> At one time, those dopes in Victoria were actually asking the Costco stores close to the border to provide specifics on what BC Costco members were buying tax free in Alberta. They wanted to find a way to collect PST from them...there were/are lots of big ticket items (and high end jewelry) going out the doors and into pickup trucks. The answer, or course, was a resounding 'buzz off and go away'.


interesting. that's probably why the jewellry stores in Calgary do so well.


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## Square Root

@ Charlie. It may not make much difference for people with incomes under $100k but for high earners the savings can be significant. Since retirement (5years) I figure we have saved about $1million in tax. Most psople don't appreciate the significance of provincial tax differences.


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## Charlie

Agreed SR. For incomes over $120K taxable the differences can be quite significant.

But for a $140K earner with RRSP's and childcare deductions, the impression that Alberta is some sort of tax haven isn't necessarily accurate.

Plus it's cold. .


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## cannon_fodder

Square Root said:


> @ Charlie. It may not make much difference for people with incomes under $100k but for high earners the savings can be significant. Since retirement (5years) I figure we have saved about $1million in tax. Most psople don't appreciate the significance of provincial tax differences.


SR,

Saved when comparing which provinces?


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## steve41

OK, here is a study... 35 yo, earns $100K, retires at 65 and dies broke at 95, full CPP&OAS....

Based on a rate of growth of 6% and inflation at 2%, here is the after tax income he can expect, living in each province....

$60,737 bc
$59,207 ab
$57,625 sask
$56,375 man
$58,064 on
$57,912 nb
$55,597 ns
$55,983 pei
$57,671 nfl


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## Square Root

cannon_fodder said:


> SR,
> 
> Saved when comparing which provinces?


Alberta vs Ontario


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## nathan79

Yeah, taxation changes implemented by the Liberal gov't over the last 10 years have made BC very kind to you above a certain income threshold. It's those of us making between 30-50K a year who really screwed in this province. We don't get any of the low income rebates on MSP or HST, plus we have the carbon tax and ridiculous housing expenses. I'd be much better off in Alberta than here.


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## Karen

When I was doing my income tax return for 2010, using TurboTax, I played around with changing the province and comparing what I would have paid if I lived in a different province. I don't remember them all, but I do remember that I paid less on my income of about $78,000 here in B.C. than I would have in any other province. If I lived in PEI, I'd have paid about $5000 more - it really shocked me, as I had no idea there was such a big difference between provinces.


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## TomF

Something else to consider:

Every year, the Fraser Institute publishes its calculations for "Tax Freedom Day". Basically, it lumps together the taxation of all levels of government, and determines the day on which we finish paying off our taxes to government and start putting our money in our own pockets. The Canadian average for 2011 was June 6.

They further break their numbers down by province.
In Alberta, Tax freedom Day fell on May 18.
In British Columbia, Tax freedom Day fell on the national average: June 6.
So, the average British Columbian spends almost a month longer than the average Albertan paying taxes.

If you are interested, the report is posted as a PDF on the Fraser Institute website (or you could do your own search for "Tax freedom Day"):

Tax Freedom Day 2011

Hope this helps.


Tom


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## steve41

TomF said:


> Something else to consider:
> 
> Every year, the Fraser Institute publishes its calculations for "Tax Freedom Day". Basically, it lumps together the taxation of all levels of government, and determines the day on which we finish paying off our taxes to government and start putting our money in our own pockets. The Canadian average for 2011 was June 6.
> 
> They further break their numbers down by province.
> In Alberta, Tax freedom Day fell on May 18.
> In British Columbia, Tax freedom Day fell on the national average: June 6.
> So, the average British Columbian spends almost a month longer than the average Albertan paying taxes.
> 
> If you are interested, the report is posted as a PDF on the Fraser Institute website (or you could do your own search for "Tax freedom Day"):
> 
> Tax Freedom Day 2011
> 
> Hope this helps.
> 
> 
> Tom


Duh. When you consider that Albertans pay no provincial sales tax, it is no contest. However, we were talking about income taxes.


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## cannon_fodder

Thanks TomF. That's the kind of comprehensive information for which I was looking.


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## ghostryder

TomF said:


> Something else to consider:
> 
> Every year, the Fraser Institute publishes its calculations for "Tax Freedom Day". Basically, it lumps together the taxation of all levels of government, and determines the day on which we finish paying off our taxes to government and start putting our money in our own pockets. The Canadian average for 2011 was June 6.
> 
> They further break their numbers down by province.
> In Alberta, Tax freedom Day fell on May 18.
> In British Columbia, Tax freedom Day fell on the national average: June 6.
> So, the average British Columbian spends almost a month longer than the average Albertan paying taxes.
> 
> If you are interested, the report is posted as a PDF on the Fraser Institute website (or you could do your own search for "Tax freedom Day"):
> 
> Tax Freedom Day 2011
> 
> Hope this helps.
> 
> 
> Tom



"Tax Freedom Day" is a joke. The whole calculation is rigged to get the result that Fraser wants.


If they used the same method of calculation their US counterpart does "TFD" would be in Late March or early April. But they prefer to try and generate more outrage by using a rigged calculation.


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## Brian K

Also - something that is overlooked or unknown when moving from one province to another is the "Welcome" tax - a Tax on the purchase of your house. My parents moved to Ontario from NB and were shocked to see that they had to pay an additional tax on the value of their house. BC also has this tax - not sure how many other provinces do this. I think it is about 3% of the house value. I hear that this tax is only applied if you move from another province. If you move to the province and rent for 6 months before buying there is no tax since if appears that you are already a resident of that province and they are not trying to grab from current residents so that is one way to get around this tax. It would be handy to have a friend or family member that would allow you to use their address temporarily.


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## Charlie

I'm unaware of this "welcome tax" in BC. Maybe it's just a Nova Scotia thing?

You may be thinking of the property transfer tax and the exemption for first time buyers? You do need to live in BC for 12 months to qualify -- but you also need to be a first time buyer -- never having owned a home anywhere in the world previously, and the home has to be below a certain threshold. BC buyers, regardless of how long they've lived in the province are generally subject to the tax except for that one-time first home buyer exemption.


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## Brian K

That "Welcome Tax" is also in Ontario. My parents moved to Kanata and found this out. A bit of a surprise and something you don't find out until it is too late to try to get dodge. (They could have 'rented' from my brother who lives 2 houses down the road and saved a few grand - Welcome to Ontario! Yours to discover (the taxes))


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