Canadians living Near the Border Escape their High Taxes by Shopping in the United States

Posted by PITHOCRATES - May 26th, 2012

Week in Review

High prices in Vancouver getting you down?  No problem.  Just hop into the car and head to the U.S. border.  Everyone else is (see Cross-border shopping: price trumps moral suasion in the fight for consumers by Craig McInnes posted 5/22/2012 on The Vancouver Sun).

I always feel a little guilty when I shop in the U.S. I would much rather support local merchants. I get the whole notion that local merchants employ my neighbours and that the money they earn stays in the community and creates more jobs.

But as the report from the Bank of Montreal pointed out last week, the price gap between Canada and the U.S. is too great to be ignored. The report predicts that gap, combined with new rules about how much Canadians can bring back duty free, is going to increase the already powerful pull of cross-border bargain hunting.

We learn early on that a penny saved is worth two pennies earned, thanks to the effect of income and consumption taxes. So mining lower prices is both a thrill and sound financial management.

The gap between sample retail prices in the U.S. and Canada documented in the Bank of Montreal study is compelling. Running shoes were 37-per-cent more on this side of the border. A Canon camera was five-per-cent more, a Gap Kids T-shirt cost $5 more here…

And it’s not just price. The bigger market in the U.S. offers more choice as well…

But is this short-sightedness on my part? Am I undermining my community, my country and ultimately myself in my drive to save money by passing over the merchants in my neighbourhood and town?

No.  It’s not short-sightedness.  It’s you getting the most value out of your money.  For why should you pay higher prices to subsidize uncompetitive businesses?  However, if you want all of those government benefits you pay for with those high income and consumption taxes then, yes, you should pay the higher prices.  Which pay for all of those government benefits.  Including that national health care everyone in America is so envious about.

It makes it tough on a government to put high taxes on gasoline and other goods & services in cities close to the U.S. border.  For those living in the interior of Canada can’t escape this social democracy as easy as those living near the border can.  And this is the greatest threat of any social utopia.  Better stuff across the border.  Because if people can escape the high taxes of their utopia so they can better afford to live it will only put pressure on the government to raise taxes further.  To make up for that lost tax revenue on those purchases across the border.

Of course to have this problem can only mean one thing.  Canadians are taxed too much.  Those consumption taxes really inflate prices in the supply chain.  Adding a tax whenever someone adds value.  It adds up.  And given the opportunity people will avoid it.  A lesson as old as time.  People are smart shoppers.  They spend their money wisely.  And they will go where they will get more value.  And typically that will be where there is more capitalism.  And less socialism.  Even if you live in a country that has just a little socialism.  For in the social democracies of the West there are varying degrees of socialism in these countries.  But one thing is always certain.  This kind of cross-border shopping traffic is always towards the country with less socialism.

This even holds true for health care.  For people who want the best in health care will travel from a country that has more socialism to a country that has less socialism.  Even in Canada.  Where they pay high income and consumption taxes in part to pay for that free national health care.  Of course Obamacare will put a stop to that.  For when Obamacare is just like the Canadian system there will be no reason for Canadians to cross the border.  For the amount of socialism in our health care systems will be the same as in the Canadian system.  And the American system will no longer be better than the Canadian system.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , ,

Comments are closed.

Blog Home