Wednesday, August 23, 2006

Reforming Canada's tax system: Payroll taxes, and families

After last talking about seniors, I'm going to end this series by talking about two other issues necessary to reforming our messed up tax system.

Payroll Taxes

These are not just the taxes we pay for compulsory programs such as EI and CPP or RRQ. They are also the taxes corporations pay -- which also include workers' compensation and health taxes. Generally speaking, they are fairly competitive with other countries; but they could still be restructured. Here's what I would do:
  • Employee health and safety should be a shared responsibility between workers and employers. While corporations have a duty to make sure their eimployees are safe, the workers in turn have a duty to make sure they stay safe. So I would transfer a portion of the WCB tax to employees, so it's a 50-50 proposition.
  • Companies currently pay EI premiums per capita at a rate 40% higher than what we pay on payroll deductions. As EI is now mostly self-funding, employers deserve a break -- so I'd lower their premiums so it's on a par with employees, as is the case with CPP / RRQ.
    If overcontributions were made during the year for EI or pensions, employers should get a rebate, as employees do. Right now, employers lose the overcontribution and they can't carry it forward to write off against future contributions.
  • If a province has a health tax for employers, it should for employees as well. I for one don't mind making a small contribution to make sure I'm covered by "The System." However, it should be fully deductible. Right now, it's not. It should also be geared to income, as it is in Ontario and Québec. Alberta and British Columbia have a head tax, punishing the poorest families.
  • All payroll dues should be fully deductible for employees. Right now, they only get a credit of 15.25%.
  • All programs financed by compulsory dues should be managed by arms-length boards who invest the money on behalf of the taxpayer and try to achieve the maximum possible return. The Caisse de dépôt is certainly the most successful at this, and the Canada Pension Plan now has an investment board, but there's no reason why EI and provincial WCBs (other than the one in Québec, which the Caisse manages in addition to the RRQ) could do the same. If it means lower premiums across the board in the long run, so much the better.
Families and children

I've written numerous posts on this, so I won't write an encyclopaedia. Bottom line: Restore the Young Child Supplement, and make the Harperbucks fully tax free and geared to income, not universal. This would mean a full child tax credit for families with net incomes under $112,000, and a partial credit from that level to $172,000. This would cover 98% of families. Harper's plan actually raised taxes on families, it did not cut them -- and when they realize the money is taxable, they're going to flip. (Yes, some stay at home parents will think it's tax free, but their spouses' deduction will drop by an equivalent amount -- not to mention that the tax free portion of the credit and the GST rebate will be clawed back big time as well.)

As for parents themselves, eliminate the marriage penalty. Completely. Two income families should have no more rights than sole breadwinners or single parents. I'd raise the spousal deduction so it's the same as the personal exemption.

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