News Leaflets
A leading news portal.

Explainer: EI, CPP premiums are on the rise, but there is more to the story than numbers

0 37

Next year, increase to EI premiums will add up to $31 for the average Canadian worker, says Finance Minister Chrystia Freeland

Article content

OTTAWA – With new leader Pierre Poilievre at the helm, the Conservatives have made the cost of living their focus and have narrowed in on some looming increases in Employment Insurance and Canada Pension Plan premiums

Advertisement 2

Article content

In the House of Commons Wednesday, Poilievre accused the government of making a bad economic situation worse for Canadians with new charges.

Article content

“It plans to raise both EI and CPP premiums, the paycheque tax, right at a time when we are facing 40-year highs in inflation; all-time highs and increased housing prices,” he said and then called on the government to cancel all of the increases.

As it stands, EI and CPP premiums will both increase on Jan. 1, 2023, taking a small dent out of Canadians’ paycheques.

In April next year, the Liberals’ carbon tax will rise as well, adding $15 per tonne to a new total of $65 per tonne in the provinces where the federal program applies. Those increases are slated to continue until the tax reaches $130 per tonne in 2030.

Advertisement 3

Article content

The CPP increases are part of the government’s broader plan to increase benefits to retirees. The maximum benefit a retired Canadian can receive today from CPP is about $15,000, but under a deal worked out with provincial governments, including some Conservatives premiers, the contributions and benefits will be around $20,000 per year in a few years time.

To pay for those increased benefits, contributions are rising as well from 5.7 per cent of earnings this year to 5.95 per cent starting on Jan. 1. For a person with the maximum amount of pensionable earnings the contribution would rise by about $300 next year.

Trevor Tombe, an economist at the University of Calgary, said even if the Liberals wanted to postpone the coming CPP hikes, it can’t do so without provincial agreement.

Advertisement 4

Article content

“The federal government can’t change that unilaterally even if they wanted. It’s a joint federal, provincial program that requires agreement across governments,” he said in an email.

Of the three increases the Conservatives are calling to freeze, the carbon tax is the one the Liberals have the most direct control over. The government could choose to reduce or delay that tax, but the Liberals’ overall plan to reduce carbon emissions and meet Canada’s Paris target is based on a rising carbon levy.

When Poilievre and Finance Minister Chrystia Freeland sparred over the issue during Wednesday’s question period, Freeland was quick to point out that even with the coming increase EI rates were higher when the Conservatives were in power and specifically when Poilievre was minister of the department.

Advertisement 5

Article content

Employment insurance premiums are based on a set amount per $100 of an employee’s earnings.

The Conservative leader was minister of employment and social development in the final year of Stephen Harper’s government, 2015, when the rate Canadians paid was $1.88 per $100.

Conservative leader Pierre Poilievre rises during Question Period, in Ottawa, Thursday, Sept. 22, 2022.
Conservative leader Pierre Poilievre rises during Question Period, in Ottawa, Thursday, Sept. 22, 2022. Photo by Adrian Wyld /The Canadian Press

c

The hike set to hit Canadians in January will bring the figure to $1.63, higher than the $1.58 it is now, but still lower than it was at any point during the Conservatives’ entire last tenure in office. Employers also pay into the system at a rate of 1.4 times the rate employees pay, which means they will pay $2.28 per $100 next year.

But one number doesn’t tell the whole story, because the amount of income covered under the program has also risen. When Poilievre was minister, the program cost a maximum of $930.60 for a worker, but next year it will cost a maximum of $1,002.45. An employer’s maximum contribution will be $1,403.43.

Advertisement 6

Article content

The government has the final say on EI premiums and the Liberals have frozen rates for the last two years. They also reduced the number of hours you need to work to qualify. The government does receive annual recommendations for rates based on estimates by economists and actuaries. Legislation requires the government to aim to ensure the overall EI account returns to balance over seven years.

When the account is in surplus, governments can lower premiums or, as both Conservatives and Liberals have done before, use the surplus funds for the government’s general revenues.

But the EI account today is far from surplus, the pandemic drained it to the point where it ended the last fiscal year $29 billion in the red. The government’s assessment of EI actually recommended a larger increase of $1.74 per $100 of earnings, but legislation prevents any increase of more than $0.05 in a single year.

Freeland said the increase to EI premiums adds up to $31 for the average Canadian worker next year. She said the Conservative approach to freeze EI contribution would cost $2.5 billion. She said the government believes that money could be better spent, pointing to the government’s plan to boost the GST credit for low-income families.

“Doubling the GST credit for six months is around $2.5 billion and the proposed EI freeze is around $2.5 billion,” she said. “I would say our targeted meaningful support is the right compassionate choice.”

Twitter:
Email: [email protected]

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! News Leaflets is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave a comment
Immediate Unity Profit Immediate Gains ProI