Personal Finance

Income Over $150k To Be Heavily Taxed

  • Last Updated:
  • Sep 15th, 2014 8:25 pm
Tags:
None
Deal Addict
Nov 24, 2004
4663 posts
1242 upvotes
Toronto
The claim that RRSPs have nothing to do with "tax avoidance" seems specious to me. Isn't the whole idea that you contribute to your RRSP, avoid paying tax on some of your income at the time of contribution, then withdraw from those savings when you are retired and in a lower tax bracket? The point is to defer paying taxes on part of that income until a time when you are paying a lower tax rate. It's a method of reducing tax paid over one's lifetime, not just deferring payment of taxes.

If I am mistaken here someone please correct me.
Deal Addict
User avatar
Feb 19, 2014
3352 posts
2338 upvotes
Langley
JHW wrote: The claim that RRSPs have nothing to do with "tax avoidance" seems specious to me. Isn't the whole idea that you contribute to your RRSP, avoid paying tax on some of your income at the time of contribution, then withdraw from those savings when you are retired and in a lower tax bracket? The point is to defer paying taxes on part of that income until a time when you are paying a lower tax rate. It's a method of reducing tax paid over one's lifetime, not just deferring payment of taxes.

If I am mistaken here someone please correct me.

If you're making $150k a year and max out your RRSPs, while having a good investment portfolio, RRSPs can get over utilized after 20 years. My uncle makes about $200k a year, is 52 years old, has a good investment portfolio, and has supplemental income with investment properties/renting. He told me he doesn't contribute to RRSPs anymore because he has too much money in them.

He has supplemental income, so if he were to withdraw from his RRSP's his tax bracket would still be high he said, even when he retires.

For the average person that will likely not have supplemental income, RRSP's are great. But, for people who are making over $150k, I can see how RRSP's don't always work.
Deal Addict
Oct 29, 2010
4475 posts
811 upvotes
kashirin wrote: take any European country, Israel
I can whisper even one country you won't believe Cuba
I believe in Cuba they get $20 a month
Strange $250 or 400 000 per year get the same result
Israel is very different though.
First, it's half public half private. The public option pays very little, until they get some real experience, they make a lot less than I.T. I've heard numbers around $2,000 per month which is around or slightly below the average salary in Israel.
Second, getting accepted to med school in Israel is just as hard if not harder than it is in Canada. They have a special exam you take after high school and army to which only the highest 1% of the grades in that year get accepted. Then, it's also 7 years of university and costs about 4-5k per year. Quite a few people who want to go to med school end up going to Eastern Europe to study because it's nearly impossible to get in.
What most doctors end up doing there is divide their week such that they work 3 days public and 3 days private where public pays almost nothing and private pays about 6k+ per month.
In terms of service, it is better because there is less stress on the system, if you have something urgent you can just pay for it and get it done but overall less stress on the system means you don't wait more than a few months for a specialist.
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
flafson wrote: Israel is very different though.
First, it's half public half private. The public option pays very little, until they get some real experience, they make a lot less than I.T. I've heard numbers around $2,000 per month which is around or slightly below the average salary in Israel.
Second, getting accepted to med school in Israel is just as hard if not harder than it is in Canada. They have a special exam you take after high school and army to which only the highest 1% of the grades in that year get accepted. Then, it's also 7 years of university and costs about 4-5k per year. Quite a few people who want to go to med school end up going to Eastern Europe to study because it's nearly impossible to get in.
What most doctors end up doing there is divide their week such that they work 3 days public and 3 days private where public pays almost nothing and private pays about 6k+ per month.
In terms of service, it is better because there is less stress on the system, if you have something urgent you can just pay for it and get it done but overall less stress on the system means you don't wait more than a few months for a specialist.
How about the UK? GPs make around 70k (pounds). Speaking of wait times, there are long queues for various procedures in Canada and doctors are highly paid. How do you explain that? You pay the same as US but receive shi**y service.
Deal Addict
Nov 24, 2004
4663 posts
1242 upvotes
Toronto
jellytime wrote: For the average person that will likely not have supplemental income, RRSP's are great. But, for people who are making over $150k, I can see how RRSP's don't always work.
Yes, I don't disagree with this or with the rest of your post. For many high-income people RRSPs can indeed be problematic. For someone who expects to be in a lower tax bracket at retirement than he or she is beforehand, they can be very valuable. My comment was directed at those who feel RRSPs are a mechanism of tax deferral and not of tax avoidance. For those in the latter case (lower tax bracket after retirement) there certainly is an element of tax avoidance as well as deferral.
Deal Addict
Oct 29, 2010
4475 posts
811 upvotes
ksgill wrote: How about the UK? GPs make around 70k (pounds). Speaking of wait times, there are long queues for various procedures in Canada and doctors are highly paid. How do you explain that? You pay the same as US but receive shi**y service.
Remove the ban on private option and see what happens. People who want service now will pay some money for it and remove stress from the system. I see no reason why it will hurt the system like some think.
Newbie
Jan 26, 2014
45 posts
12 upvotes
kashirin wrote: yes, I expected this sort of reply
so tell me why in Europe they work for 100k but here they must get 400k?
in some countries the same qualifications doctors work for 10k
hell even in Toronto, thousands of foreign trained doctors work as taxi drivers and janitors because they don't have a way to confirm their credentials
but somehow we don't have enough doctors and I have to pay 40% tax to support obscene salaries to those 25 000 god chosen doctors

Why? Because the 100k you mention is in GBP, comes with a DB pension plan, 6 weeks of vacation, extended health benefits, no overhead and a defined 40 hour work week. Net take home - pretty much the same. This is from a specific example comparing my take home pay with my colleagues performing the same specialty work in Cambridge UK.

I'm not sure where you cite the 10k "in some countries". I've worked in Ethiopia and I can tell you the salary for part-time work in government hospitals is much above 10k.

Canada has a world-class system for training physicians - this is not true of most of the nations that have trained your taxi drivers and janitors. It's unfortunate they are not utilizing their expensive skills taking care of the patients in their home nations because the vast majority do not have the skills or experience to provide the standard of care expected in Canada.

Not only is this thread off track it's filled with bologna.
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
flafson wrote: Remove the ban on private option and see what happens. People who want service now will pay some money for it and remove stress from the system. I see no reason why it will hurt the system like some think.
I agree, it is just that some here think that Canadian healthcare system is perfect the way it is.
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
Oslerscodes wrote: Why? Because the 100k you mention is in GBP, comes with a DB pension plan, 6 weeks of vacation, extended health benefits, no overhead and a defined 40 hour work week. Net take home - pretty much the same. This is from a specific example comparing my take home pay with my colleagues performing the same specialty work in Cambridge UK.
...
I can assure you that physicians here (Canada) make 2-3x the amount you quote above, have a DB pension plan and receive 5-6 weeks of vacation + extended health benefits. What are you talking about? Stop whining!
Deal Expert
User avatar
Oct 26, 2003
39291 posts
6324 upvotes
Winnipeg
ksgill wrote: I agree, it is just that some here think that Canadian healthcare system is perfect the way it is.
people are afraid of change, some think doc will all go private cause that's more money
Newbie
Jan 26, 2014
45 posts
12 upvotes
I'd love for you to assure me all of those things (pension, overhead, paid vacations, defined work week) because they have been missing form my compensation package. It may exist for the few hospital employed physicians (medical microbiologists, pathologists, etc.) but certainly not the majority.

My point: there is a major difference between a salary that provides a host of benefits and OHIP/MSP money transferred in a fee for service environment. As the previous post asked why physicians in Europe make 100k and those in Canada make 400k I was pointing out that the net benefit per physician is virtually the same (and presumably the money paid by the state would be the same as well) despite the 4:1 difference alluded to.

I'm not sure the whining you're referring to - just pointing out the truths and trying to provide some insider's context for the numbers thrown around by ignorant commenters.
Deal Expert
User avatar
Oct 26, 2003
39291 posts
6324 upvotes
Winnipeg
do doc in the states actually get paid more after everything is considered? they have to pay a lot more liability insurance, more overhead to chase down billing and deal with insurance, etc.
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
divx wrote: do doc in the states actually get paid more after everything is considered? they have to pay a lot more liability insurance, more overhead to chase down billing and deal with insurance, etc.
Yes, they do but it entirely depends on which city/state you work in and your specialty. For example, a physician in New York, NY will make way more than a physician in St. Louis, Missouri.

To use a specific example, the average radiologist salary in the USA is $365,000 vs $217,000 in Canada. Factor in the lower taxes, generally cheaper cost of living and you are still looking at a difference of ~100k+. Do you think the insurance and overhead costs a 100k/year more? The truth is that Doctors (like a lot of other professions) get gypped in Canada when you compare to the USA.
Deal Expert
User avatar
Oct 26, 2003
39291 posts
6324 upvotes
Winnipeg
^basically they move to the states for a pay raise and we need to import more doctors from other countries to make up for the loss
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
divx wrote: ^basically they move to the states for a pay raise and we need to import more doctors from other countries to make up for the loss
That is exactly how it works except Canada makes it harder for foreign trained physicians to practice (when you compare to the US). Well qualified people end up driving cabs here just to make ends meet as we complain about shortage of Doctors. Then you have people here who claim that physicians from other countries are not as "well trained" as Physicians here. The solution is to put these guys through a year or two of unpaid training and not to deny them completely. :facepalm:
Deal Expert
User avatar
Oct 26, 2003
39291 posts
6324 upvotes
Winnipeg
ksgill wrote: That is exactly how it works except Canada makes it harder for foreign trained physicians to practice (when you compare to the US). Well qualified people end up driving cabs here just to make ends meet as we complain about shortage of Doctors. Then you have people here who claim that physicians from other countries are not as "well trained" as Physicians here. The solution is to put these guys through a year or two of unpaid training and not to deny them completely. :facepalm:
the states is pretty smart and that's how they maintain their position as super power. They do a crappy job of training their own talent but sucks up all the good talent in the world, why spend all the money and effort to train local talent when you can import it on the cheap? We are doing the same as them, except on a lesser extent.
Deal Addict
User avatar
Mar 8, 2004
3228 posts
964 upvotes
Mississauga
CensoredByRFD wrote: It sounds like if that's the case, the benefits of incorporations and paying one's self with dividends when possible will be a good tax planning strategy again.
(
fyi CRA is clamping down on single employee corporations (i.e. contractors) paying themselves out with dividends. I don't have the source for this at the moment, but I do recall reading an article about it in 2013.

Anyway, it's kind of moot. If you're earning anywhere near 150K you should be smart enough to mitigate your exposure and if you're not, then you deserve to be taxed in that bracket
Sr. Member
Feb 5, 2013
592 posts
109 upvotes
So the people making 150,000 are a moot point. It is the office of 3 or 4 executives making 1.5 million plus who see that moving their office to another jurisdiction makes them richer. You lose all of their taxes, as well as the taxes from all of their support staff. Sure, it's not easy to move for everyone, but if one office bolts to greener pastures, it negates all the extra revenue the tax was supposed to garner. Then who do they go after? The sub 150,000 crowd, of course.
Deal Expert
User avatar
Oct 26, 2003
39291 posts
6324 upvotes
Winnipeg
bankonit wrote: So the people making 150,000 are a moot point. It is the office of 3 or 4 executives making 1.5 million plus who see that moving their office to another jurisdiction makes them richer. You lose all of their taxes, as well as the taxes from all of their support staff. Sure, it's not easy to move for everyone, but if one office bolts to greener pastures, it negates all the extra revenue the tax was supposed to garner. Then who do they go after? The sub 150,000 crowd, of course.
that's the point of a free society, people can move
Deal Addict
Nov 17, 2004
3236 posts
1612 upvotes
Tig wrote: (
fyi CRA is clamping down on single employee corporations (i.e. contractors) paying themselves out with dividends. I don't have the source for this at the moment, but I do recall reading an article about it in 2013.

Anyway, it's kind of moot. If you're earning anywhere near 150K you should be smart enough to mitigate your exposure and if you're not, then you deserve to be taxed in that bracket


Hey, yes, they did that starting around last year.

I was referring to the ones of us who own corporations with staff/employees/offices, etc. At the moment, with the recent increased taxation of small business non-eligible dividends there really isn't much benefit to paying ourselves dividends, so we usually just go with straight salary and expenses most of the time.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)