Payroll taxes up despite low-tax claims by Jim Flaherty

OTTAWA—Despite the Conservatives’ oft-heard statement that they have lowered taxes, Canadian workers are handing over more in payroll taxes—as much as $180-a-year more as a result of increases in Employment Insurance (EI) premiums under Finance Minister Jim Flaherty.

In the upcoming federal budget, Flaherty will be sure to point out that, beginning in 2017, the Conservatives want EI premiums set on a seven-year break-even track, which is expected to reduce what workers and employers send to Ottawa to pay for EI.

But in the meantime, Prime Minister Stephen Harper’s government is using increased EI premiums to help eliminate Ottawa’s deficit.

Since 2008, employees’ EI premiums have risen from $1.73 per $100 of insurable earnings to $1.88. This means anyone making $47,400 or more in 2013 paid $891 in EI to Ottawa, compared to $711 five years previously, according to the Canadian Taxpayers Federation.

Coupled with matching EI funds from employers, these premiums provide a hefty inflow of revenues to the federal treasury—enough to more than cover current pay-outs to laid-off Canadians receiving EI benefits. In all, between 2013 and 2016, the federal government will amass a $13.8-billion surplus in its EI transactions.

This extra cash comes in handy for the Conservatives, who are trying to eliminate an overall $17.9-billion budget deficit. Aided in part by EI surplus funds, Flaherty plans to wipe out his overall budget deficit in 2015 and replace it with a $3.7-billion surplus that year.

Last September, noting that declining jobless rates meant Ottawa was paying out less in EI benefits, Flaherty said he was freezing the EI premium rate for three years at $1.88 per $100 of insurable earnings. This means the increases in EI premium rates Flaherty had previously said were in the works will not take place. As a result, he said this will leave money in the pockets of employees and employers.

But Parliamentary Budget Officer Jean-Denis Fréchette suggested in an analysis in December that, if the goal is to have an EI account that is revenue neutral, the $1.88 premium rate is still too high.

And, in an appearance before the Commons finance committee, Flaherty was asked by Liberal finance critic Scott Brison why, if the EI account is running a surplus, the government is not actually lowering the premiums paid by workers and employers. “Stability is important,” Flaherty responded. Rates are being frozen “to provide certainty so that businesses know, especially small businesses, that they will not be faced with increases,” he said.

Canadian Taxpayers Federation federal director Gregory Thomas calls it “a creeping tax grab.

“Ottawa is using Employment Insurance as a cash cow,” he says. “EI taxes have gone up 28 per cent since 2008. Benefits paid out have only gone up 18 per cent, so do the math.

“By their own forecast, the government expects to collect $4.2 billion more than they pay out in benefits in the current fiscal year.”

And that estimate could turn out to be $500 million or $1 billion too low, Thomas said.

But the government stresses that, as of 2017, EI rates will be adjusted up or down to ensure Ottawa does not have surpluses premiums piling up.

“The requirement (for the EI account) to break even over time ensures that any surplus EI premiums are ultimately used only to pay for EI benefits as any surplus revenues generated will be dissipated over time through lower rates,” Marie Prentice, press secretary for Flaherty, told the Star.

Original Article
Source: thestar.com/
Author: Les Whittington