Time to get payroll taxes under control --- for the sake of jobs
Acting AIMS president Charles Cirtwell has an interesting article in the Chronicle Herald regarding the ballooning surplus in the EI reserve account. (which he was reminded of when he read the latest Fiscal Monitor) Checks out a few of his facts on the issue:
He's right. The EI surplus is far too high and so are the premiums [payroll taxes] been paid into the fund by both employees and employers. Moreover, it is irresponsible for the federal government to be transfering the EI surplus into general revenues to be used to pay for other programs and projects. That's not why it was put there in the first place. However, on the other side of the coin, the acount should not be completely raided either as there needs to be a reserve to prevent it from falling into a deficit during a recession. Something Cirtwell takes into account:First, EI premiums are collected to support EI payouts, not to fund general government revenues. EI premiums should not be treated, and they definitely should not be discussed by our financial managers, as if they were just another line item on a revenue statement. They are not a tax akin to business and personal income taxes – at least successive governments of all stripes have been telling us that they are not a tax. So we should not be seeking to "offset" losses. The goal of the EI managers should be to balance premiums with expected payouts plus a prudent reserve.
Second, there is a current surplus in the EI account of some $51 billion. That is $5 billion more than the $46 billion the government had already racked up in 2004 when Auditor General Sheila Fraser called the government to account over the massive surplus. At that time, she indicated that the government had not observed the intent of the Employment Insurance Act because "Parliament did not intend that a surplus would accumulate beyond what could reasonably be spent on Employment Insurance." The government already has more money than it needs to run the EI program, maintaining the flow of cash to federal coffers is a failure in good management, not something to be celebrated.Third, that paltry $46-billion surplus was already three times larger than the chief actuary of Human Resources Development Canada considered sufficient to cover expected liabilities and to provide a prudent reserve in 2001. Presumably, with the passage of time, that prudent reserve figure has adjusted itself somewhat. There has also been some discussion of late about adding new programs or extending various allowances for compassionate leave and the like and paying those costs out of the accumulated EI funds. Even with the passage of time and the introduction of generous new benefits, however, it is unthinkable that the liability would have quadrupled in six years.
Finally, let’s be clear. Contrary to what governments have been saying for a generation, EI premiums are a tax, a tax on jobs. Organizations like the Canadian Federation of Independent Business and the Canadian Taxpayers Federation (CTF) have made that abundantly clear time and time again. The higher the premiums, the higher the cost is for employers to have employees, the fewer jobs – simple.
Giving back the accumulated surplus is probably too much to ask for, but cutting premiums and ending the gouging once and for all is certainly within reason. The CTF recently estimated the necessary premium rate to sustain current payouts and a prudent reserve at $1.59 per $100 of earnings. For individuals, that is 28 cents lower than it is now. That’s about $50 savings for someone making $24,000 a year. It is $220 for their employer, who pays a considerably higher premium. Multiply that by 10 employees, or a hundred, and soon you are talking about some real money.Indeed you are. I have to admit, the harmonization of premiums at a level $1.59 for both employer and employee is probably the best way to get payroll taxes under control.
6 Comments:
$50 for 24,000 is pretty negligible. That's .2%
Plus, of that $24,000 an employer contributes $550, also pretty negligible. If your argument is that an employer isn't goint to hire another $24,000 employee because its going to cost them $550 extra, I think you'd better take a close look at that employer because they are obviously the DUMBEST employer this side of Alberta.
The argument was more that payroll taxes were a pain in the ass, but software pretty much took care of that.
And I guarantee, again, GUARANTEE, that that $550 is kept in mind when setting pay schedules. There might be more griping now because the labour market is somewhat tighter, but they've been benefitting from low wages for quite some time now.
It's no wonder the government swings both ways on the terminology, since your first argument is a claim that its not a tax, then later you go on to say that it is a tax. That seems to be a pretty big question, perhaps getting paid by an employer is simply a tax on the employer for having somebody do some work. Perhaps the price of a candy bar is just a tax. At least with the tax money to the government I get more long term benefit than the short term tax to the store owner that ends when I eat the candy bar.
But that is a big issue, and one I'm glad to see you talking about because I also guarantee that if you asked canadians whether they'd like to see their 1.59% returned, or whether they'd like to see maternal leave, paternal leave, child care expanded that they'd choose the latter.
Our tax burden [in Canada] remains far too high. Even after implementing the tax changes announced in Budget 2006, Canada will still have personal and corporate tax burdens far above the OECD average.
Moreover, our overall tax burden remains much higher than in the United States. This burden will increase even further in 2007 due to the continuation of payroll taxes.
You've got a good blog here, but don't let it go into propaganda just for the sake of your ideology. That's not even close to being true.
Australia 35.4%
Austria 57.3%
Belgium 71.2%
Canada 34.7%
Czech Rep. 47.5%
Denmark 42.9%
Finland 54.4%
France 66.8%
Germany 60.5%
Greece 44.2%
Hungary 52.5%
Iceland 38.8%
Ireland 31.4%
Italy 52.4%
Japan 29.3%
Korea 17.9%
Luxembourg 42.9%
Mexico 14.4%
Netherlands 55.2%
New Zealand 21%
Norway 43.3%
Poland 46%
Portugal 38.6%
Slovak rep. 44.4%
Spain 45.5%
Sweden 50.7%
Switzerland 34%
Turkey 44.5%
United K 40.6%
United States 34%
That makes Canada seventh lowest out of the 30 countries in the OECD and only marginally lower than two of them. Those figures are available from the OECD and are what they call 'total tax wedge' which includes federal and sub central governments, employee SSC and employer SSC. That puts Canada about 10% lower than the average.
No propaganda here, buddy. Just trying to talk about the kind of stuff the NB Opposition, the NB media and the government don't like to bring up. One example: corptate welfare. They all engage in it.
Oh btw, thx for the stats. However, you may want to look at the OECD breakdown (personal income taxes, corporate taxes, payroll taxes, etc.) Much like I did with current provincial taxes.
Mike Archibald wrote You've got a good blog here, but don't let it go into propaganda just for the sake of your ideology.
Cough. That's the pot calling the kettle black isn't it Mike?
Its propaganda if you say something that is blatantly not true because it aligns with your main message. Those figures are TOTAL taxes, meaning provincial AND employer and employee and they come straight from the OECDs website.
So the statement that Canada is above the OECD average is blatantly false, it is far far less. Canada could raise its taxes by 10% to be average, or even more to be aligned with many countries. To be aligned with the EUROPEAN average, they could raise taxes but up to 30%.
If somebody wants to show somewhere that Ive made a point that is not true then by all means point it out.
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