The Canadian Taxpayers Federation (CTF) has crunched the numbers and despite the federal government’s announcement that it’s freezing Employment Insurance taxes for three years, many Canadians’ paycheques will be getting smaller after January 1st as EI and Canada Pension Plan taxes go up.
In its annual New Year’s Tax Changes report, the CTF has calculated that maximum employee EI taxes will go up $23 in 2014 to $914, while the employer’s share of EI payroll tax goes up $31 to $1,279. That means a working couple who each earn at least $48,600 in 2014, will have $4,386 in EI payroll taxes sent to Ottawa on their behalf.
The federal government expects to collect $4.2 billion more in EI taxes in 2014 than they pay out in benefits. Other forecasts peg the EI tax windfall to the government much higher.
“People have compared the government’s EI game to a casino where the house takes a huge cut of the money,” said CTF Federal Director Gregory Thomas. “It’s completely unfair to compare EI to a casino, because you an occasionally win when you give your money to a casino.”
Thomas noted that for every dollar paid out in EI benefits, the government spends 11 cents on administration.
The maximum employee Canada Pension Plan payroll tax rises $70 to $2,426, for employees earning at least $52,500 a year. Employers match employees’ CPP payroll taxes dollar for dollar, pushing the total CPP payroll tax haul to $4,856.
Across the country, taxpayers in most provinces will see tax brackets indexed to inflation, limiting the tax grab from any cost-of-living adjustments people see on their pay cheques. The exceptions are Manitoba, PEI and Nova Scotia, where provincial governments do not index their tax brackets to the inflation, resulting in a bigger tax take for government.
In Saskatchewan, the government indexes brackets for inflation, but the federal inflation rate is used rather than the provincial inflation rate; leading to a slight tax increase in 2014 as the federal figure (0.9 per cent) is lower than the provincial figure (1.2 per cent).
“Saskatchewan taxpayers are going to feel a slight income tax increase as the provincial government uses the federal inflation rate rather than the provincial rate,” said CTF Prairie Director Colin Craig. “Someone earning $80,000 with two kids will get bit by a $13 increase.”
“It’s great the government indexes tax brackets for inflation, but in order to fully protect taxpayers the government should index the system for the provincial inflation rate rather that the federal rate,” added Craig.
CTF calculations for the tax changes that will be occurring on January 1st for 26 different income and family scenarios can be found here: http://www.taxpayer.com/media/2014_New_Years_Tax_Changes_Backgrounder.pdf