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  #41  
Old Posted Apr 11, 2015, 3:36 PM
OliverD OliverD is offline
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I think it's extremely unlikely that these new tax brackets will raise as much money as the government claims. A lot of the people in this income range have professional corporations (lawyers and doctors in particular) and are able to utilize "loopholes" to reduce the amount of tax they pay. Furthermore, there is now even more of an incentive to maximize RRSP contributions if you aren't already doing so.
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  #42  
Old Posted Apr 11, 2015, 4:09 PM
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I think it's extremely unlikely that these new tax brackets will raise as much money as the government claims. A lot of the people in this income range have professional corporations (lawyers and doctors in particular) and are able to utilize "loopholes" to reduce the amount of tax they pay. Furthermore, there is now even more of an incentive to maximize RRSP contributions if you aren't already doing so.
Very true. Almost all physicians who can, have now professionally incorporated in order to shelter their income and this can be a very successful tax avoidance strategy in the long term as it allows your savings to grow in a sheltered manner.

In return however, your legal and accounting fees are much higher than they used to be, so it becomes a bit of a "robbing Peter to pay Paul" situation.

Also, when you retire, you have to be careful how much you withdraw from your corporation on an annualized basis so that you don't deplete your savings by paying tax on excessive withdrawals. In effect, you might have a large pot of savings, but they are "untouchable" unless you want to pay a high tax rate on your withdrawals.

This is one of the reasons why I think I will be moving to a more favourable jurisdiction when I retire........
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  #43  
Old Posted Apr 11, 2015, 4:32 PM
L'homard L'homard is offline
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I think the same as Olivier. Gallant gets to brag how he taxed the rich, but with relatively little effect on the big earners.
Luckily for me, the issue rightly underlined by MonctonRad is one I will never have to deal with.
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  #44  
Old Posted Apr 12, 2015, 2:07 PM
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We are viewed as rural and backward, without a real medical school to provide back up and ongoing continuing medical education. We are also viewed as being without amenities that some expect like museums, quality theatre, private schools etc. In addition, many physicians have high income earning spouses who may find it difficult finding meaningful work in our province. Now throw in the fact that you can make 32% more money elsewhere and that by living in NB you get to pay 41% more tax. Would you come here to work???

I'm probably within 3-5 years of retirement, so I'm not going anywhere but I'm now beginning to despair over the ability of my group to find a replacement for me when I retire. Health care in this province is going to suffer. I think there is a very good chance that I will move elsewhere on retirement. Someplace to the west. Someplace with a lower tax regime and a better climate - perhaps BC.

I'm sure I'm not the only "high income earner" thinking this way.

I used to think that NB had a future. I used to believe the hype of McKenna and later Lord. I guess I was mistaken. If I was a young physician with my career in front of me, I would seriously think of moving now. NB is probably not worth the bother.......
I mostly agree with your last few posts on this topic, MonctonRad. After over a decade of training, I gave my home province at shot in spite of all the short comings you mentioned here, all of which I was well aware of btw. None of my colleagues from large canadian and US metro areas would have considered moving here and the reasons you listed keep coming up over and over again. Now they can add on top of that the title of highest income tax on the continent. Perceptions, weather they be true or not, can stay in peoples' minds for a lifetime and this can have devastating effects. I'm concerned that even if this is changed in the near future, that the damage to the province's reputation is done in many people's mind.

The future does appear to show quite a bit of uncertainty... no guarantee I will spend my entire professional career here, unfortunately... very unlikely I will spend retirement here.
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  #45  
Old Posted Apr 12, 2015, 3:01 PM
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Thanks. I note that you have over a decade of training (although you didn't specify the exact number of years). If I recall, you are a dental professional. Personally I have 13 years of university and post graduate training. For some medical specialties it can be as much as 15 years of training. This is a huge personal investment (both in time and in money), and means that you end up delaying your income earning years until your early to mid 30's. As such, you might only have 25-30 years to make this investment back before retiring, perhaps less if your health is poor or if other circumstances intervene.

You start out behind the economic eight ball and already have the equivalent of a mortgage in terms of heavy student loans. Add in another "mortgage" in terms of start up costs for your practice and a third mortgage for your actual house and you can see the type of economic pressure that new graduates are under. You may already be 33-35 years old. Do you really want to delay having a family any later? Everything is happening at once. You need to start generating income now, and the thought of living in a low remuneration/high tax jurisdiction might be too much to bear for many individuals. If you could get out from under the mountains of debt years earlier by living in a different jurisdiction, I think most people would do so. There would have to be a great overarching reason for a professional to move here now - something like family ties. Even then, I think a lot of new graduates would look elsewhere.

I moved to Moncton at the start of my career because I was from the Maritimes and wanted to stay in the region. At the time, the Moncton Hospital was the best equipped hospital in the region where there was a position available. This is no longer the case. The equipment at the hospital is average at best, and pales in comparison to some other hospitals in the region. Would I move here now if I was starting out in my career? That's a very tough call. The Moncton Hospital remains an excellent facility (no thanks to any support from the provincial government) and has a high quality medical staff, but I fear that over time, as the existing medical staff retires, that the high quality care that we provide might evaporate away.

I think that if I was graduating now that I would have more seriously explored job opportunities elsewhere. There are lots of opportunities available in high growth areas of central and western Canada. My mother however was born in the US and it would have been easy for me to acquire a green card. Perhaps I would even have looked south of the border.......
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  #46  
Old Posted Apr 12, 2015, 4:37 PM
L'homard L'homard is offline
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This is the second thread in which a member says they likely won't be retiring here. Why is this? I always thought once one retires, a lower cost region like here is where you'd want to be but I don't know much about retirement issues and challenges.
What are the disadvantages of retiring here?
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  #47  
Old Posted Apr 12, 2015, 5:22 PM
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I would imagine the answer is "it depends".

If (for example) you were a native NBer who has spent his/her entire teaching career in Vancouver and had accumulated a nice defined benefits retirement plan and a $2M bungalow in a modest Vancouver neighbourhood that you could sell for an insane profit, it would make a lot of sense to retire back home in New Brunswick.

For a self employed professional like NBNYer or myself, the circumstances can be markedly different. We have no pension plans. We will be subsisting in retirement entirely on our savings and our RRSPs. Our teacher friend (with the defined benefit retirement plan) has nothing to worry about, even if he/she lives to be 110. We on the other hand may have budgeted on the prospect of living to the age of 85, but might have the misfortune of living to 95. Self employed individuals can have the real prospect of outliving their savings. We require a tax efficient strategy in order to access and utilize our savings and this might be more easily had in a different jurisdiction.

For example, let's say I wanted to buy one final brand new car when I was 72. The most economical way to do this would be by using cash, but to do this I would have to take a dividend from my professional corporation. This dividend will increase my "income" that year, by a considerable amount, likely enough to push me into another tax bracket and thus increase my taxation rate. I will therefore have to withdraw much more money from the corporation than I intended just to pay for the additional tax. This could be a large amount, especially in the brave new world of Brian Gallant's New Brunswick. If I were living in Alberta or BC however, the tax rates could be considerably lower and I could thus keep more of my money in the professional corporation so that I could prolong my retirement savings a little bit longer.

This is why professionals without pension plans might be better off retiring somewhere else.
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  #48  
Old Posted Apr 12, 2015, 5:53 PM
L'homard L'homard is offline
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Thanks MR that's very helpful.
I will retire relatively young, but poor and will probably have to work a bit here and there until I die or become incapacitated in order to enjoy a few luxuries like medication, gasoline and heating fuel. I choose this over working until my late 60s and then "really" retiring, because I'd rather be happy and poor than be miserable working an extra 10 years.
\In my case, NB seems to be where I'll be staying.
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  #49  
Old Posted Apr 12, 2015, 8:07 PM
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Originally Posted by MonctonRad View Post

Thanks. I note that you have over a decade of training (although you didn't specify the exact number of years). If I recall, you are a dental professional. Personally I have 13 years of university and post graduate training. For some medical specialties it can be as much as 15 years of training. This is a huge personal investment (both in time and in money), and means that you end up delaying your income earning years until your early to mid 30's. As such, you might only have 25-30 years to make this investment back before retiring, perhaps less if your health is poor or if other circumstances intervene.
My situation is very similar to yours. I have 12 years of university and post-grad training and started working in my early 30s.


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Originally Posted by MonctonRad View Post


I would imagine the answer is "it depends".

If (for example) you were a native NBer who has spent his/her entire teaching career in Vancouver and had accumulated a nice defined benefits retirement plan and a $2M bungalow in a modest Vancouver neighbourhood that you could sell for an insane profit, it would make a lot of sense to retire back home in New Brunswick.

For a self employed professional like NBNYer or myself, the circumstances can be markedly different. We have no pension plans. We will be subsisting in retirement entirely on our savings and our RRSPs. Our teacher friend (with the defined benefit retirement plan) has nothing to worry about, even if he/she lives to be 110. We on the other hand may have budgeted on the prospect of living to the age of 85, but might have the misfortune of living to 95. Self employed individuals can have the real prospect of outliving their savings. We require a tax efficient strategy in order to access and utilize our savings and this might be more easily had in a different jurisdiction.

For example, let's say I wanted to buy one final brand new car when I was 72. The most economical way to do this would be by using cash, but to do this I would have to take a dividend from my professional corporation. This dividend will increase my "income" that year, by a considerable amount, likely enough to push me into another tax bracket and thus increase my taxation rate. I will therefore have to withdraw much more money from the corporation than I intended just to pay for the additional tax. This could be a large amount, especially in the brave new world of Brian Gallant's New Brunswick. If I were living in Alberta or BC however, the tax rates could be considerably lower and I could thus keep more of my money in the professional corporation so that I could prolong my retirement savings a little bit longer.

This is why professionals without pension plans might be better off retiring somewhere else.
This is exactly right and may point to some unintended longer term consequences for the province.
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  #50  
Old Posted Apr 13, 2015, 1:13 PM
pierremoncton pierremoncton is offline
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We definitely don't want to turn off competent medical professionals and end up with the bottom of the barrel, but I'm confused about the numbers you guys posted. Would appreciate some clarification.

I understand and respect that there's a long and expensive investment in education and that "starting life" is pushed back into the 30s, but that's true in every jurisdiction. I also understand that there's no public pension plan backing you guys up (which is true today for the vast majority of people, including myself).

I understand that you may make more in certain provinces, but that's again true for most professions; however, the difference in real estate pricing makes up for most of the difference (if not more; there's no way I can afford a house in the big cities even if add 50% to my salary).

Rad, you stated that the average gross income is $264k. I don't know how much you make personally, but let's use this average again to compare directly to your numbers. After 40% in expenses, you're left with $160k in taxable income. You're not at the highest tax bracket yet; and only $10k of that is taxable in the second-highest bracket (21% @ >$150k). You're paying $56,300 in taxes. Only AB ($48k), BC ($49k), NL ($52k) and ON ($53k) offer significant savings. Taxes are comparable everywhere else, and actually slightly higher in MB ($57k), NS & PE ($58k) & QC ($60k).

Public pension plans pay upon retirement an average of roughly 75% of past income. If you're like majority of people (even with your high income), you'll never save up enough in personal RRSPs to cover even 50% of your current income for a retirement period of 15-20 years, but let's say your investments are fruitful and do allow you 75% of your current income for as long as you live.

At that point, your retirement income is $120k. On $120k, the difference becomes smaller: yearly savings of $5,500 if you move to the cheapest province, Alberta.

In reality, your retirement income is likely closer to $80k (50%). The difference with Alberta then becomes $2,700.

Over 20 years, that can add up to a big difference, but an $80k retirement is still very comfortable when taking into account that your mortgage has been paid off for some time. A lot of people would feel like millionaires off that income, especially with no mortgage and no dependants.

Then you also have to consider that there's no way to foresee whether tax rates in Alberta will hold steady given the glut in oil prices.

I'm not trying to convince you to retire here, but it seems that if you've already made the choice to accept a lower income here, there's no financial advantage to retiring elsewhere. However, I'm not arguing that there's no long-term financial advantage to starting one's career elsewhere if income is the main goal.

To me, the biggest reasons I can see for high-income earners to leave are the perpetual winters and the lack of any culture and entertainment. There's nothing here for sports fans and there never will be; the closest pro teams are 1,000 km away in Montreal and Boston... there's even barely anything of family value left now that Crystal Palace is gone... no direct or cheap flights unless you're in Halifax... not even something as basic as an IMAX... and the list goes on.

Last edited by pierremoncton; Apr 13, 2015 at 2:21 PM. Reason: typo
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  #51  
Old Posted Apr 13, 2015, 1:31 PM
OliverD OliverD is offline
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I think you're ignoring a key factor in your calculations. While the average gross income may be $264k, it's going to be significantly higher for those doctors that are nearing retirement age.
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  #52  
Old Posted Apr 13, 2015, 2:38 PM
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Yes, that's one missed factor. But then you're forgetting that RRSP contributions will be much greater during those last few high-income years, hence reducing taxable income... You may not be able to afford large contributions when you're making $100k saddled with student debt, a mortgage and newborns at home, but you can afford to exhaust your past contribution room in the final years when you're making $200k with no debt nor dependants. You might put away $0 in the first year, then $100k in your final year...

I'm not pretending there are no tax savings elsewhere. What I'm saying is that they're not significant, especially when only retirement is concerned. Even if you're saving $5k a year in Alberta, is that $400 a month even sufficient to bridge the real estate price gap? From a financial perspective, you're saving peanuts.
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  #53  
Old Posted Apr 14, 2015, 2:28 PM
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from CBC:

Higher taxes on rich may miss revenue targets, experts say
Finance Minister Roger Melanson raised taxes on New Brunswick's wealthiest citizens in his March budget
By Robert Jones,
CBC News Posted: Apr 14, 2015 8:26 AM AT|
Last Updated: Apr 14, 2015 8:26 AM AT

Some leading Canadian public finance economists are questioning whether the Gallant government can raise anywhere near the $30 million it has budgeted from its new taxes on the wealthy.

"It assumes that the people who have access to the best tax advice in Canada are going to fail to take it," said Kevin Milligan, an economist at the University of British Columbia.

"I don't think that's a great assumption. I would be very cautious in expecting a large revenue windfall."

Finance Minister Roger Melanson established two new high-income tax brackets in his budget to generate $30 million in new revenue.

New Brunswick's new top rate, for taxable incomes above $250,000, was set at 25.75 per cent. That's the highest in the country and 80 per cent more tax than the province was charging at that that income level just three years ago

Jack Mintz, an economist at the University of Calgary, a long-time tax adviser to both Liberal and Progressive Conservative governments in New Brunswick, says studies at the federal level show raising rates on high-income earners increases the use of shelters and other tax avoidance techniques.

"Raising the [top] rate is really done for more fairness reasons than for revenue reasons because you don't raise that much revenue at all," said Mintz.

"It would be nice if we had evidence-based public policy."

New Brunswick's top rate on high incomes was just 14.3 per cent three years ago.

read more:
http://www.cbc.ca/news/canada/new-br...-say-1.3031842

personal note - My prediction is that this 80% increase in the highest marginal tax rate will not generate the $30M that the government hopes. I suspect the revenue recovered will be more likely $10-15M. A truly paltry sum given the $450M deficit and not really worth the bother. The only real winners here will be the tax accountants and the lawyers. In return, the province gets a significant black eye as it will be forever known as the "highest tax jurisdiction in North America". This type of reputation will be priceless in driving away high income earners who might have otherwise considered moving to NB.

Stupid, stupid, stupid.

Of course, this is what I have come to expect from the Brian Gallant Liberal government. We may drive away all the movers and shakers that the province needs to grow it's economy, but at least we will have $1B of shiny new asphalt roads around the province,
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  #54  
Old Posted Apr 14, 2015, 3:08 PM
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Aye. "Taxing the rich more" sounds like a good idea, and might be, in principle, except that there aren't very many of them, ESPECIALLY in NB. The relatively few you'll find have good tax accountants, too. There really isn't much to grab here... not as much as people would think.
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  #55  
Old Posted May 15, 2015, 3:21 PM
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Interesting article from CBC:
http://www.cbc.ca/news/canada/new-br...eurs-1.3075477

With the new tax rate proposed by Brian Gallant on the most wealthy, New Brunswick will have the honour of being the jurisdiction with the fourth highest tax rate in the entire OECD!!!

We will have the highest tax rate in North America, and within the civilized world, only Portugal, Sweden and Denmark will be higher than us...........

The article points out there is some concern that the new tax rates might force entrepreneurs to relocate elsewhere rather than stay in NB. No kidding!!!

I like NB and the people here are very nice, but it's not as if we're the most scenic province in Canada and the weather could certainly be a whole lot better. There are also better resources, opportunities and amenities elsewhere. At a certain point, you have to begin wondering about the choices in your life..........
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  #56  
Old Posted May 16, 2015, 6:19 PM
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We will have the highest tax rate in North America, and within the civilized world, only Portugal, Sweden and Denmark will be higher than us...........
Only on those within the top income bracket. You left out the 'top' in your post.

Those making less than $150K aren't affected by this fourth-highest OCED tax rate line.
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  #57  
Old Posted Jun 9, 2015, 6:07 PM
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A recent article on an old issue about what the capital of the province should be.

According to the article, the debate on what the capital of New Brunswick would be was what ultimately somehow prevented NB and NS from coming into confederation as one province too.

Read it soon before the commenters find it. (So far they're pretty tame, rightfully pointing out the Inland protection being another factor in Freddy being the capital)
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  #58  
Old Posted Jun 9, 2015, 6:44 PM
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A recent article on an old issue about what the capital of the province should be.

According to the article, the debate on what the capital of New Brunswick would be was what ultimately somehow prevented NB and NS from coming into confederation as one province too.

Read it soon before the commenters find it. (So far they're pretty tame, rightfully pointing out the Inland protection being another factor in Freddy being the capital)
Not being the capital really sealed Saint John's fate to never become a large city, since all those services like UNB and government offices were located upriver, miles away from the primary city. It was that, along with the tariff wall that absolutely killed the Maritimes, that kept the city out of the big leagues.
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  #59  
Old Posted Jun 23, 2015, 1:08 AM
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http://www.cbc.ca/news/canada/new-br...lled-1.3123106

I can't say that i've seen a more amateurish attempt at running a provincial government in my decade of following politics. I understand that the government has priorities of choosing lowest-cost tenders (which is wrong, IMO) but it just seems like people in the Premier's office or the Government Departments aren't reading the papers they're signing off on.

Cancelling this contract is just as foolish as signing it in the first place. Not only is this government showing they're willfully blind in their decisions but also that they have no backbone when they finally do make a decision. This is the second decision they've flipped on following the hospital issue in Saint John last week.
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  #60  
Old Posted Jun 23, 2015, 1:21 AM
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Gallant is really turning into a 1 term Premier; our 3rd in as many terms I think. The way things are going, unless the Tories come up with a solid contender, (and depending on what happens Federally), it could be an opening for the NDP or some other party to rise to leadership.
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