Should you stay or should you go now?

23 01 2007

I stole this from the Herald today. Makes you think and wonder.

REMEMBER the Parable of the Prodigal Son?

It’s the little story in the Book of Luke where a young man takes his inheritance, emigrates to a jurisdiction with greater economic prospects and lower taxes, engages in riotous living and goes through a lot of money. Then one morning he reads ads in the newspaper saying there’s new-found opportunity at home, so he heads back home where Rodney MacDonald greets him with big smile and a new job.
Or something like that. I may be a bit vague on the details.
But the point of the story is Nova Scotia is now calling its prodigal sons (and daughters) to come home again. It’s launched its “Come to Life” campaign in Alberta trying to convince its oilpatch expats to head home. The growth in the financial and energy industries, and the aging of tradespeople are creating opportunities for young people, and some jobs are offering salaries similar to those available in richer markets. And it’s cheaper to live here; your money goes further, right?
That’s the claim. As the Atlantic Canada Opportunities Agency states on its website: “The cost of living in Atlantic Canada is 25 per cent to 65 per cent lower than other major North American regions.”
I’d take issue with that claim. Certainly the cost of property is lower here than in other places, but the cost of living is another matter altogether.
Let’s say we’re recruiting home two young accountants — one from Toronto, the other from Calgary — to take jobs with one of the Bermuda-based financial companies setting up in Halifax. We’ll pay them $70,000 a year — roughly what they’re making down the road.
The biggest financial advantage of their repatriation is homes are so much cheaper here, and they’re both selling homes in order to move back east. According to the Canadian Real Estate Association, the average price of homes in December was $362,000 in Calgary, $336,000 in Toronto and $206,000 in Halifax.
So before moving, our young accountants have a choice: do they move into another average house in Halifax, reducing their mortgage and saving money? Or do they move up the property ladder, buying a better house for the same money they paid in Alberta or Calgary.
Since their salary is the same, I bet they’d buy the nicer house. A house in the $350,000 range in Halifax will be nice but not extravagant, and having a nice home will make the move seem worthwhile.
However, they will find out before too long that it is harder to afford a $350,000 house in Halifax than it is in the other two cities, even with the same salary.
Check out these factors that are going to erode their seemingly lofty salary:
Income Tax: The average income tax rate on a $70,000 salary is 23.7 per cent in Ontario, 24.4 per cent in Alberta and 28 per cent in Nova Scotia, according to a tax calculator provided by the financial company Morningstar. So their income tax will probably be $16,510 in Toronto, $17,107 in Calgary and $19,604 in Halifax.
Property Tax: Let’s assume the homes are assessed at about $275,000 in each market. According to the municipalities’ websites, our young accountants will pay a tax rate of 0.83 per cent in Toronto and an annual tax of $2,283, and 0.77 per cent or $2,118 in Calgary. In Halifax, the rate is 1.41 per cent and the annual tax bill is $3,878.
Home Heating: By living in Calgary or Toronto, our accountants could heat their home with gas, whereas in Halifax they have to use heating oil. According to Taracen Gas of B.C., the average annual household heating cost of gas with mid-efficiency furnace is $758, whereas with heating oil it’s $1,135.
Electricity: According to information available on the utilities’ websites, a household using 750 kilowatt hours of electricity a year will have an annual electricity bill of $653 in Toronto, $912 in Calgary and $1,041 in Halifax.
Car: Let’s say our accountants pay the same amount for their car and car insurance in each market. They’re going to have to put gas in that car, let’s say about 40 litres each week. According to the Calgary consultancy MJ Ervin & Associates Inc., consumers on Jan. 16 paid 80.7 cents a litre in Toronto, 82 cents in Calgary and 93.8 cents in Halifax. Annualized, the costs are $1,678 in Toronto, $1,750 in Calgary and $1,951 in Halifax.
In each category, you can nitpick with the details of my research, but in broad terms, you’re going to pay more for essentials, other than shelter, in Halifax than in other markets. By my count, our accountants’ annual bill for income and property tax, electricity, heat and gasoline is going to be $21,882 in Toronto, $22,545 in Calgary and $27,607 in Halifax.
Put another way, you can get a nicer house in Halifax than in the other cities, but other than that, the cost of essentials in Halifax is 22 per cent higher than in Calgary and 26 per cent higher than in Toronto.
On top of that sales taxes are higher here, food is more expensive and other things like air travel cost more here. The moral of the Parable of the Returning Bluenose is not to splurge on a big house when returning home.
The other conclusion is that the governments have to do more to lower taxes and remove various inefficiencies from the economy if they want our prodigal expats to stick around.

A few footnotes NS Power was approved for another rate increase yesterday, gas is still too much and taxes are out of control, what I’d love to see is a comparison to the US say in North Carolina….Hmm.

BUT! If I lived in any of those places I couldn’t slip to the hub to see family, CB for foolishness, and don’t let me start on donairs….

Mood of the moment ~ I’m going to make a spice rack after the job hunt
Tune of the Moment ~ Listening to Jay online
What’s for supper ~ Something kid friendlyish




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