Geographic Arbitrage – In Canada, Your Province of Residence Can Cost You Dearly

(Originally written November 9, 2017. This is still pertinent today).

For the past year, my wife and I have been living in Halifax, Nova Scotia, the population hub of Canada’s Maritime provinces. We love it here, and for good reason: wonderful people, excellent restaurants and culture, and fantastic scenery everywhere you look. And yet, as I write this, I am looking at the boxes I have packed for our planned move back to Edmonton, Alberta. Where did it all go wrong?

My wife and I are exactly the types of people that governments everywhere say they want to attract. We are relatively young, in good health, with higher-than-average household income. Outside of driving on local roads, we use very few government services. We are precisely the type of people Nova Scotia has been trying to attract as they struggle with an aging population that for many years has stubbornly resisted any significant growth.

Despite this, we have discovered that, from a financial standpoint, the value proposition for living in Nova Scotia is completely lacking. This becomes clear when analyzed from the standpoint of what we pay versus what we get in return.

What It Costs

In Nova Scotia, it feels like the provincial and municipal governments constantly have their hands deep in our pockets. The most obvious example of this is with provincial income taxes. Our family income tax burden in Nova Scotia is about $350 per month more than what we’d pay back in Alberta at our current income levels. Then there is the extra sales tax: Alberta charges only 5% GST whereas Nova Scotia charges 15% HST. For our family that costs us another $300 per month, or so. Then there’s all the small stuff: tolls for bridges and roads (Alberta has none), gas is more expensive, alcohol is more expensive (given a government monopoly on distribution this is taxation by another means), and environmental levies are steep. All in, I estimate our choice to live in Halifax costs us at least $750 per month in additional taxes, fees and levies.

As an example of how all this adds up, I recently bought a $129 computer monitor here in Halifax. After the HST and an environmental levy of $24.50, the cost was $176.53. Using my personal average tax rate, I have to earn $242.99 at work (gross pay) to buy that $129 monitor here in Nova Scotia. In Alberta, the total cost of the monitor after taxes and levies is just $148.05 and I only need to earn $191.85 gross income to pay for it. To sum it up, to buy this item in Nova Scotia cost me 27% more on a gross-income basis than buying the exact same item for the same base price in Alberta. Ouch. If you multiply that math across every purchase I make during the course of a year, it becomes obvious that the extra costs add up fast.

The Core Issue – Value For Money

Now, to be fair, when I moved here I already knew most of this and rationalized it as the price to be paid for living in such a great place. The shocker came when we eventually did need a government service, only to find it was impossible to access. Due to some minor health issues that cropped up this year, my wife required a stress ECG test and I needed a scope of my upper gastrointestinal tract. These are minor tests that are pretty straightforward and take little time. However, in both cases we were told the wait list to have this done is two years. In B.C. and Alberta (both provinces we have lived in previously) the wait for these types of very basic services is measured in weeks, not years. A lot can happen in two years and the idea that this is an acceptable wait time for a confirmed diagnosis is preposterous.

And therein lies the root of the problem – the province of Nova Scotia expects me to pay approximately $9,000 per year ($750 per month) in extra taxes, fees and levies in exchange for giving me worse service and support than I can get in most other Canadian provinces. If I move back to Alberta and my wife and I contribute that $9,000 per year to our Tax Free Savings Accounts and earn 5% on the money, in 20 years we’ll have saved up more than $312,000. For that kind of money, I’ll even put up with Alberta’s frigid winters.

Customers, Not Sheep

So here’s where the province of Nova Scotia serves as a warning example for other governments: taxpayers are not sheep to be fleeced, they are customers. They pay for services and expect value for money. Today, thanks to technology, changing attitudes, and opportunities for geographic arbitrage, people are more mobile than ever and can and will choose where they want to live. If you want a healthy, vibrant, growing population – and the tax revenue that comes with it – you’d better take a long, hard look at the value proposition you are putting out there.

For me and my family, we are voting with our feet.

Important Disclaimer: the information above is for general informational purposes only and does not in any way constitute an offer for the purchase or sale of any security and is not intended to be considered comprehensive or personalized financial or investment advice. assumes no responsibility for the use or application of this information. Always consult a tax, investment, or other appropriate professional before adopting any new financial strategies.

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