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Hands off the payroll taxes

Finance ministers are morphing into Saturday morning cartoon characters

By Todd Humber (todd.humber@thomsonreuters.com)

You can almost hear their hands rubbing together with glee.

As the economy thaws, finance ministers and public officials are morphing into Saturday morning cartoon characters. You’ve all seen this episode — the one where two characters are stuck in an abandoned cabin with no food and one of them morphs into a turkey leg as the other salivates.

Employers, well, you’re playing the role of the turkey leg. And finance ministers are salivating as they eye the massive deficits incurred during the recession.

It’s a rerun we’d rather not watch. Federal Finance Minister Jim Flaherty heard the rumble in his tummy when he looked at the deficit in the employment insurance program. EI has become a huge drag on government books, as claims and payments skyrocketed through the recession.

According to Statistics Canada, EI roles swelled by 329,000 people during the 2008-2009 recession, hitting a peak in June 2009. Since then, there has been a decline of 157,100 recipients, but there were still 672,600 people collecting pogey as of July (the most recent numbers available.)

Since Ottawa wisely froze EI premiums as part of its economic stimulus during the recession, the money coming in hasn’t nearly matched the cash going out. To which employers say, “Oh well.”

Not to suggest employers are shirking off their duty to help out laid off workers. But, as Canadian HR Reporter reported back in 2008, employers overfunded EI to the tune of $54 billion between 1996 and 2007. That money went into the government’s general revenues.

Maybe it’s unfair to pin the mistakes of previous regimes on Flaherty, but employers aren’t looking to play the blame game. Companies didn’t get their money back when they overpaid, so it doesn’t seem fair for Ottawa to come knocking now that the shoe is on the other foot.

The freeze on EI premiums expires on Jan. 1, 2011. Originally, it looked like Ottawa was going to increase the premiums by the maximum allowed. That would have amounted to an 8.7-per-cent increase. Or, in pure dollars, an extra 23 cents per $100 for employers and another 15 cents per $100 for employees.

Thankfully, the federal Conservatives relented and have lowered the premium increases to five cents for employees and seven cents for employers, saving workers and companies about $1.2 billion next year. It also moved to limit future increases to a maximum of 10 cents per $100 for employees and 14 cents per $100 for employers.

An increase in payroll taxes is the last thing this economy needs. It’s recovering, but it’s not roaring. Best not to ease up on the throttle just yet.

Todd Humber is the managing editor of Canadian HR Reporter, the national journal of human resource management. For more information, visit www.hrreporter.com.

Todd Humber

Todd Humber is the publisher and editor-in-chief of Canadian HR Reporter, the national journal of human resource management. Follow him on Twitter @ToddHumber
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