From a tax standpoint (financial) and geographical standpoint, there is no financial incentive to be a medical doctor, lawyer, optometrist, judge, dentist, medical specialist or any other professional in Canada. When my father asked if I would do the 7 years education again to work as a health care professional, I couldn't answer one way or the other - I probably wouldn't. I don't think I will encourage (or discourage) my kids to go that route. To give up/"sacrifice" 7 years of my life, busting my b@lls so that I can put a designation behind my name, and end up with more than $100,000 in student loans (tuition alone was greater than $21,000/yr), is not ideal if financial independence is the goal. I would argue that going down the Frugal Toque, MMM, Mr. Rich Moose or Prairie Stache road and getting a high paid tech job (or the like) after getting far less education is far more advantageous if you are wanting to be FI by 30.
And for a professional to be heavily taxed on the income they are finally able to make, certainly doesn't put them at an advantage over others who haven't had to do the schooling and the loans. It doesn't surprise me then, to see most health professionals in our health region, move to other locations, largely due to higher wages and less taxes.
I think you are not factoring in the whole picture. Of course if you want to be FI by 30, you shouldn't go to school/intern for 10 years. The best route might be to taken an apprenticeship in high school, get your ticket by 19, and be a plumber, electrician, welder, diesel mechanic, CNC machinist, HVAC tech, or the like and make $40/hour plus overtime. Some tech jobs like network pro or similar could also have you making $40/hour or more by 20 years old. If you are a really good saver, you will be rich by 30. If you are a great investor as well, you will live as good or better than your town doctor.
I certainly am factoring in the whole picture! (How am I not factoring the whole picture?! From where do you get a fuller picture than I do?)
My main points in summary are: (and a few I touched on in my previous comment).
1. There is very little incentive to be a professional in Canada from a taxation standpoint.
2. There is no way a person can be financially independent and retire early (before 35 yoa) as a doctor, lawyer, etc.
3. Even on this thread, there are some that poo-poo high income earners getting a perceived advantage in the way they are taxed. (This thought at its extreme would be socialism/leftism/welfarism, correct?) Hey, these people will pay more tax than you will in your lifetime, and at a higher tax percentage - Income Splitting present or absent!
4. And those that complain about these perceived advantages haven't had to put in the time (7 years +), energy (required to learn immense body of knowledge) and resources ($10,000 - $35,000 in Canadian institutions) to obtain the privilege of earning high incomes that these professions get.
5. If the time, energy, and resources are used to get a job that is high paying, why are they getting "punished" with very high taxes? If your money was taxed at a 48% rate, you'd be pissed - and looking for ways to lower it as well.
All this to say, why put in the time, energy and resources in being a doctor, lawyer, etc when you can be a plumber and do just as well financially in this country? (If FREEDOM and TIME is the goal, you'd certainly be better off being something other than a professional that can incorporate - this assumes the same spending habits of all earners, those incorporated and otherwise).
On the other hand, if you want to earn a high, stable income for 35-40 years, are not a great saver, and pursue a lavish lifestyle, you should become a doctor or dentist. In Canada the tuition for med school is cheap, especially factoring in the immense number of scholarships available at most schools for the average student. I know people who have gone through med school here in Alberta and came out debt-free including living expenses with no help from parents.
Hey man, its not about the lavish lifestyle. We are on the MMM forum. I'm here because I think a frugal lifestyle is far more beneficial than a lavish one.
“If you buy things you don’t need, soon you will have to sell things you need.” Warren Buffet Living frugally allows a person to buy time and freedom. The process for your friends to become MDs required more than just money - its time and their freedom. Giving up time and freedom to a job/profession doesn't sit well with most mustachians. Does it for you? So then why not thank the high wage earner for the time, energy and money they've put into their job/profession, and the contribution they are making to society, and allow them the "benefit" of income sprinkling?
Once you grad, you immediately earn well into the 6-figures and your clientele is guaranteed due to the restrictive nature of the profession. You don't have to deal with the litigation & insurance nightmares of the U.S. and you still make a really good living. Most doctors live in upper-class neighbourhoods and have little to complain about. It is all but guaranteed you will retire a multi-millionaire.
You may be surprised how much litigation and malpractice insurance a professional needs to carry in this country. But yes, you are right, the legal costs are lower here in Canada. I think the care in the US is often legal-centric and not as patient-centric as it could be (as it is in Canada).
Just because you make 6-figures and live in an upper-class neighbourhood, doesn't mean you will be guaranteed a retirement as a multi-millionaire. A person who makes $20,000 and spends $20,000, is just as wealthy as a person who makes $2 mill and spends $2 mill.
Best part, you only have one true client and the cheques never bounce.
Does big brother pay you? I'm happy I am not fee for service and getting paid by the government. I've experienced that, and I am better off without it!
In the U.S., many doctors (and other people who take extensive studies) have HUGE student loan debt. Malpractice insurance has gone nuts and dealing with healthcare insurance companies is a paper nightmare. They earn more money, but arguably have higher expenses and a less pleasant practice experience. It probably takes them a decade or more just to get out of the hole. Over a lifetime and all things considered, I bet the average doctor in the U.S. doesn't do much better than one in Canada.
I'd bet you are wrong. The reason MMM himself went to the States was the increased wages he could get there, and the favourable tax situation the States has. Even if a MD graduated in the US with twice the debt, they have far greater capacity to pay it off far quicker. Isn't it true that a high savings rate is the most important factor that determines when they can retire/become FI?
I don't like high taxes as much as the next guy, but I think it's ridiculous that someone can avoid those taxes just by incorporating even though they are hardly running a real corporation in the more traditional sense of the word. It is morally wrong and unfair. I don't care if you are a political "special" like doctors and farmers.
In my view, the government should reduce income taxes for all, spend a lot less, and restrict incorporation to businesses with multiple arms-length shareholders who have no meaningful impact on day-to-day business decisions. It would make businesses more accountable and our society better off. However, this will probably never happen in the forseeable future as there are too many vested interests and just 2 (or 3) real political options who all follow the same broader mindset with a few twists to appeal to their little electorates.
I'm good with paying taxes. Taxes benefit society as a whole. But note that high wage earners are still getting taxed at a high rate. Income sprinkling helps soften the blow. But they are still getting kicked in the
@$$ when they make the money, and then later on in life when they retire and withdraw their investment income. Over the course of their life they will still be taxed far greater than the "average" Canadian, and at a higher overall percentage. From a pure financial perspective, this fact does not encourage a person to excel in their job pursuits and take risks to better their lives or the lives of those around them - and make a large wage in doing so.
Regarding "morally wrong and unfair." You would do well to explain that.
I don't see how allowing a group of people to Income Sprinkle so that they aren't getting absolutely punished for doing well in life is an issue of morality. If it would be, having some Canadians (usually minorities, the lazy, or the like) gaming the Canadian society through handouts (ex. refugees, welfare, Ambulance taxi service, extra RESP contribution for the "low income", "emergency-I've-got-a-cough-and-slightly-sore-throat" health care, etc) would be a far greater issue of moral "wrongness."
Regarding "our society better off." Our society would be better off if a person was encouraged to excel in their work, in their knowledge, in their financial well being.
Our society/government does us no favour when every child is given a medal for playing a sport, win or lose; or kids pushed through the school system and telling every single one of them they can be whatever they want to be; or telling people that pumping gas is just as valuable a job as diagnosing and treating people's problems - and telling them as much by the wages/benefits earned and taxes/no taxes issued.