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Kamloops News

ALBAS: There is only one taxpayer

Dan Albas a Member of Parliament.
Image Credit: SUBMITTED/Dan Albas
January 05, 2019 - 12:00 PM



It was not long into the new year when a citizen shared with me an email they received from their employer stating Statutory Canada Pension Plan (CPP) "deductions are reset for the new year so you will notice a decrease in your net take home pay starting in January”.

The citizen asked if this information was correct and if so, what are the reasons for it?

As I reported back in July and October of 2016, the Trudeau Liberal government raised CPP premium rates.

The changes mean that beginning this year and for every year until 2023, the mandatory CPP contribution rate will be gradually increase from the former rate of 4.95% up to 5.95% in 2023.

It is true that in most situations your net take home pay will be less because of this CPP increase.

Likewise, for an employer the costs of making payroll will also correspondingly increase. The intent of these CPP changes is to increase the total annual CPP benefit (assuming an individual reaches age 65).

As an example, the current maximum CPP benefit is $13,110 a year.

This CPP maximum benefit would increase by $4,390 per year up to a new maximum of $ 17,500 annually. Keep in mind the maximum benefit figures only apply to those who contribute the maximum CPP contribution for roughly 40 years.

For most workers, the rates will vary.

One of the downsides to the CPP program is that it is not a transportable retirement investment. For citizens who do not live to reach 65 or only live a few years beyond 65, a lifetime of contributions paid to CPP are of no significant benefit to a spouse or family in that the full value of the contributions cannot be transferred through to an estate.

So where would those unused CPP contributions end up?

One of the lesser known criticisms of CPP is the fact that your CPP contributions are being consumed by significantly rising administration costs.

Operating costs went from $3 million in the year 2000 to $803 Million in 2015, not to mention external management fees that have risen from $36 million in 2006 to $1.25 Billion in 2015. These are serious administration increases.

The Canadian Federation of Independent Business (CFIB) released a poll indicating that 70% of business owners have indicated that the costs of the CPP premium increase will create cost pressures to freeze or cut salaries.

While an increased CPP benefit may appear to help younger people the most, perversely higher payroll taxes can discourage hiring of youth, who already face significantly higher unemployment rates due to a lack of experience.

For some, finding that first job will be tougher.

In response to these increased costs the Trudeau Liberal budget for 2019 will lower the small business tax rate to 9%.

This was the same small business tax cut that was originally legislated by the former Conservative government, cancelled by the Trudeau government in Budget 2016 and was only reinstated after significant political pressure.

My concern is with reduced take home pay, courtesy of the increased CPP deductions, coupled with recent provincial announcements to increase ICBC rates, as well as many local governments increasing property taxes at rates beyond inflation, citizens are being collectively squeezed from all levels of government.

From my perspective it should never be overlooked that there is only one taxpayer and when the Prime Minister refers to the concept of a balanced budget as being an “austerity” measure, this points to a road of future tax increases to pay for deficit spending.

My question this week is a simple one: Are you concerned by having your net take home pay reduced by increased CPP premiums?

I can be at or toll free at 1-800-665-8711.

— Dan Albas is the Member of Parliament for the riding of Central Okanagan Similkameen Nicola. This riding includes the communities of Kelowna (specific boundaries), West Kelowna, Peachland, Summerland, Keremeos, Princeton, Merritt and Logan Lake.

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