Is this more pre-positioning for a tax hike, or a good sign for the fiscally sound?
Paul Martin is considered by many to be a fiscal hawk. After all, as Canada’s finance minister he made the rare accomplishment of balancing the federal budget. Back in 1994, Mr. Martin called payroll taxes “
a cancer on job creation,” referring to Employment Insurance (EI) taxes and CPP taxes.
1994 Paul Martin was absolutely correct. When employers are forced to pay more per employee, they have less money leftover to create jobs or offer higher wages.
But it appears Mr. Martin has had a change of heart. On Wednesday, he told reporters that any increases in CPP premiums would not affect take home pay because of declining EI taxes. He erroneously said that EI payroll taxes are declining in Ontario.
While EI payroll taxes were once declining, this is no longer the case, and they have been steadily increasing since 2008. As the Canadian Taxpayers Federation pointed out in its annual
New Year’s Tax Changes report, increases in CPP taxes have far outpaced any savings from EI over the past two decades.
In 2008, the typical employee in Canada paid $711 in EI payroll taxes. The number has risen to $914. And while, EI taxes on employees have fallen from 1994 numbers when the typical Canadian contributed on average $1,197, total employee payroll taxes have grown. In 1994, a typical Canadian employee paid $2,003 annually in combined payroll taxes, while today the combined tax paid is $3,339.
This represents a 67 per cent increase, hardly a negligible increase.
Mr. Martin also contended that payroll taxes are not, in fact, a tax, but instead an “investment in the future.” Perhaps he is unaware that the federal government will
collect $4.2 billion more in EI taxes than it will pay out in EI benefits. The remainder, of course, will be siphoned into the vast coffers of government.
Last time we checked, and we do check every two weeks when our pay cheques come in, money the government takes away from us is a tax. Especially when that money goes into general revenue.
But all this talk of a “made-in-Ontario” solution to CPP begs the question of why Premier Wynne is budding her nose into something that has long been handled by the federal government? Ontario has not even been able to manage what they are responsible for: Ontario government employee pensions. These plans face far more severe funding shortfalls than the CPP; in fact, taxpayers are scheduled to pay $142 million per year in “special contributions” to bail out the Public Service Pension Plan alone, not to mention other underfunded plans.
That is why the Canadian Taxpayers Federation is offering recommendations on how Ontario can address retirement security without raising taxes.
First, encourage the federal government to use the other payroll tax – EI – to help top-up retirement savings. By creating an Employment Insurances Savings Account to replace the current scheme, a two-income family that starts contributing at age 25 and are fortunate enough to remain employed throughout their careers
could save $1.07 million by the time they retire. Not a bad nest egg.
Second, give taxpayers a break. It’s no wonder everyday Ontario families have a difficult time saving for retirement when they are nickel-and-dimed by their government with higher taxes, increased premiums, new user-fees and soaring energy rates. Worst of all, taxpayers are on the hook for bailing out wealthy government employees and their golden parachutes. Discussions about retirement savings should be geared toward helping people keep more of their own money, not scheming new ways to claw it back.
And while Premier Wynne is on the topic of retirement savings, she should address the pension problems within her own government and put an end to defined-benefit pension plans for government workers. These plans should be replaced with defined-contribution plans, or the made-in-Canada “shared risk”
pension model that was recently introduced in New Brunswick.
It’s a good sign that the Premier wants to discuss retirement reform, but she should do so while keeping Ontario taxpayers top of mind.
