Why are Canada's prices so much higher than the USA even though the dollar is at par???

Question

Why are Canada's prices so much higher than the USA even though the dollar is at par???

Answer 1

I think it's because they have free medical, therefore driving taxes higher.

Answer 2

Right off the bat, the stuff about healthcare is total BS.

Some of the price difference IS taxes. Canada has the 7% (I think it is now at 5%) GST which applies to all provinces, and provincial sales taxes that vary (up to about 10% I think).

US sales taxes vary - there is no federal sales tax, while some states are as high as 8% (California) and others are lower.

But, as you point out, your question is really about why prices have not fallen even though the dollar is stronger. Taxes have been coming DOWN in Canada relative to the US in the last 10 years (i.e. by at least 2% due to the reduction in the GST) so that can't really explain it.

The reason is that prices in Canada are "sticky" in the sense that they do not react one for one with changes in the exchange rate. So even if good X costs $1 in the US and $1.25CAN in Canada, and the Canadian dollar becomes more valuable, the Canadian price may not adjust downwards in response, even if the good is imported from the US.

One major factor in this is local currency pricing and pricing to market - car companies, for example, set their prices for each market separately. For various reasons it is hard to arbitrage the price differences away. Or to take a more familiar example, look at magazines and books. There is a suggested retail price on them, in US and Canadian currency, that almost never changes, even though the exchange rate fluctuates. Thus all those books that have more expensive Canadian dollar prices are now more expensive in Canada than the US because the dollars are at par (but weren't 5 years ago). There is a large economics literature on this - google sticky pricing and pricing to market - but that is the basic idea. There ARE some goods where the price in Canada has been going down as a result of the weak US dollars, but many goods fall into the category where there is imperfect arbitrage and local market power, so producers can set whatever prices they want, they don't revise or update prices frequently, and it is hard to arbitrage away price differentials.

Answer 3

Taxes and Socialism

Answer 4

Standarized health-care.  The free money that we have is taken from themz Canadiens and forced into their health system.  So, in a sense, the cost to produce starts out higher right from the get-go.

Answer 5

Three reasons,  Taxes, and then some more taxes, and then again another tax.  There is GST  and PST and road tax and fuel tax and liquor tax and tobacco tax and income tax federal then the provincial, land tax  taxes on postage stamps, and funerals, and a cup of coffee. and that is just the tip of the iceburg.