New year, new policies – as promised last September by Prime Minister Stephen Harper, the feds have put their freeze on Employment Insurance rates into action.
The EI rate freeze, which took effect New Year’s day, will suspend the premium rate for employees at $1.88 per $100 of insurable earnings through until the beginning of 2017.
But the Canadian Taxpayers’ Federation – a not-for-profit citizen’s advocacy group which lobbies for lower taxes, less waste and accountable government (probably unbeknownst to you on your behalf) – warns some taxpayers might see a little spike in their premiums.
According to the group’s New Year’s Tax Changes report, maximum employee EI rates will go up by $23 in 2014 to $914!
Don’t worry though; your boss isn’t off the hook. The CTF also calculates that maximum EI rates paid by employers will climb $31 to $1279.
To put it in perspective, a working couple with each partner bringing in at least $48,600 in 2014 will pay $4,386 in EI payroll taxes to Ottawa.
This year, the feds hope to collect $4.2 billion more in EI taxes than they pay out in benefits.
Ultimately, Finance Minister Jim Flaherty took a rosy view of the rate freeze, pointing out that while Canada has seen steady job creation since the end of the global recession, significant challenges remain and this freeze will help to push through them.
“Our Government is freezing EI rates and leaving $660 million in the pockets of job creators and Canadian workers in 2014 alone which will help provide the certainty and flexibility employers, especially small businesses, need to keep growing,” said Flaherty at an event hosted by Ottawa Camping Trailers Ltd.
“This tax relief will help support Canada’s continued economic recovery and sustained, business-led, long-term growth.”
The Argument For Tax Payers
The freeze doesn’t have support across the board, illustrated in a responding press release by the CTF. Stated Federal Director Gregory Thomas, “People have compared the government’s EI game to a casino where the house takes a huge cut of the money.
“It’s completely unfair to compare EI to a casino, because you can occasionally win when you give your money to a casino.”
He points out that the government siphons off 11 cents of every dollar they pay out of EI for administration purposes.
In most provinces, according to the CTF, taxpayers will see their brackets indexed to inflation, limiting the tax grab from any cost-of-living adjustments they might see on their paycheques. Manitoba, PEI and Nova Scotia, where the provincial governments do not index their tax brackets to the inflation, will likely see a bigger tax take from the government.
Canadian Pension Plan land will also see a bump in payouts with the maximum employee CPP payroll tax for employees earning at least $52,500 a year rising $70 to $2,426. Employers will echo employers’ CPP payroll taxes dollar for dollar, pushing the total CPP payroll tax to $4,856.
A Silver Lining For Savers And Givers
In addition to the changes you might see on your pay stub, the government is also looking to make charitable donations more attractive.
First time donors will receive a credit of 40 per cent of the first $200 they donate, as opposed to the usual 15 per cent credit. Tax credits for donations over $200 are also rising to 54 per cent for first timers rather than 29 per cent.
Adults 18 years or older will also see a bit more wiggle room with their Tax-Free Savings Accounts as contribution limits are $5,500 this year, plus whatever unused contribution room they already have accumulated.
The Lifetime Capital Gains Exemption will increase from $750,000 to $800,000.