OTTAWA, ON: The Canadian Taxpayers Federation (CTF) released its annual New Year Tax Changes calculations today, which provide projected personal income and payroll tax changes taking effect January 1, 2012.
The biggest change that will impact every working Canadian are EI and CPP payroll tax hikes. Payroll taxes will increase on January 1st, by a combined $306 for employees and employers.
Employees will see an increase in the EI rate from 1.78 per cent to 1.83 per cent, an increase in the EI maximum insurable earnings from $44,200 to $45,900 and an increase in the CPP maximum pensionable earnings from $48,300 to $50,100, for a total $142 in higher employee payroll taxes.
Employers will pay even more with EI rates increasing from 2.46 per cent to 2.56 per cent and corresponding increases in maximum EI and CPP amounts, for a total $164 in higher employer payroll taxes.
“Payroll taxes are going up because the federal government has yet to tackle our broken EI program,” said Gregory Thomas, CTF federal director. “EI payroll taxes are going to go up to keep the fund financed because the program has little to do with an actual ‘insurance’ program, reflecting the risk of unemployment in premiums.”
Thomas added, “If we don’t want higher, job-killing payroll taxes, then we have to redraw the EI program from the bottom-up.”
Click here for details on payroll tax changes
Click here for details on combined income and payroll tax changes
CTF’s report calculates what the New Year will mean for a 22 different income and family scenarios after adjusting 2011 income levels for inflation.
Losers, and Big Losers
While payroll tax-hikes will see every working Canadian pay more of their income towards government in 2012, different inflation rates will see those in provinces above the national average pay more in their effective tax bill. The reverse is also true for those in provinces with inflation rates below the national average.
Indexation Dinosaurs
While the federal government and most provincial governments index their income tax rates to inflation, there are still several provincial holdouts. These include Nova Scotia, PEI and Manitoba, which saw inflation rates of 3.6 per cent, 2.6 per cent and 2.5 per cent respectively.
“By not indexing for inflation, the governments of these three provinces make themselves the taxation dinosaurs of confederation,” said CTF National Research Director Derek Fildebrandt. “Taxpayers in those provinces who get a mere cost of living pay increase will see themselves pay a higher tax rate 2012, even though they have the same real income."
Health Taxes
Health taxes in Ontario and BC are also not indexed to inflation.
B.C.’s health tax will see a significant increase of 6.4 per cent for couples and 5.8 per cent for single individuals and those with children.
Quebec taxes out of Control
Despite having an inflation rate below the national average at 2.6 per cent, Quebecers will still be the second biggest losers on January 1st due to hikes in their own payroll taxes. This is thanks in part to an increase in QPP rates from 4.95 per cent to 5.025 per cent, as the province is scheduled to do until rates reach 5.4 per cent in 2017. Taken together with an increase of 3.7 per cent in maximum pensionable earnings, Quebecers will see their maximum QPP contributions go up 5.6 per cent to $2,342.
Quebec’s EI rate will also increase from 1.41 per cent to 1.47 per cent. Taken together with an increase in maximum insurable earnings, Quebecers will see their maximum EI contributions go up 8.3 per cent to $675.
