Even though tax comprises a lot of things that come as benefits such as healthcare or education, there is a common belief that Canadians pay more taxes than their American counterparts. Politicians in Parliament have also resorted to similar statements to stress towards lowering taxes. But, are taxes in Canada really higher than the taxes in America? The answer to this comes about as extremely complex. Comparing the statistical differences between the taxes involving the two nations come across as strange, as both are dependent on completely different scenarios.
Using an average is not the ideal way to understand the difference either, as the rich and poor lie on two extreme ends. In general, Canadians with a lower income pay lesser taxes but even the richer Canadians are not as well-off as affluent Americans in general.
American federal income tax brackets ideally range from 10% to 35%, whereas in Canada it ranges from 15% to 29%. The bottom Canadian tax bracket stays at 15% until $41,554 and in America, the lowest tax bracket goes from 15% at $8500 and to 25% at $35,401. This is one of the main reasons why lower income Canadians often end up in a better tax income situation than Americans who are in a similar tax situation.
This is not technically a form of income tax, but Canadians pay an Employment Insurance (EI) which is based on their employment income. EI premiums are about 1.73% of the gross employment income and employers pay about 1.4 times of that amount. In America, the federal unemployment tax is paid exclusively by employers.
Healthcare is one of the most important topics of comparison between the two countries’ tax system, as suggested by the best tax consultants in Toronto. The income taxes that are paid by Canadians partially fund the country’s socialized health plan, which gives equal access to medical facilities at no additional cost. In the U.S., healthcare must be paid for individually or through any healthcare insurance plan.
The bottom line is that, there cannot be an ideal demarcation. Some years, Canada ranks higher in tax than the U.S., and the vice-versa takes place. To understand this better, consult our experienced and skilled tax consultants in Toronto at The Accounting and Tax for the best and most affordable services surrounding doubts concerning taxes in Canada or the US.
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