Ottawa’s cash grab from the hands of workers.
Federal Finance Minister Ralph Goodale has announced that Ottawa plans to reduce – by scant pennies – the required employer and employee contributions to its employment insurance fund (EI).
Goodale magnanimously remarked that Ottawa has given up $10.5 billion in EI premiums since 1994. But the finance minister and his colleagues must first understand they cannot “give up” what is not theirs in the first place.
In 2003, 98 percent of all businesses in British Columbia were defined as small businesses (fewer than 50 employees). Micro-businesses (those with less than five employees) comprised about 84 percent of the province’s small businesses.
Approximately 971,900 people – representing 58 percent of all private-sector jobs in the province – were employed by small companies in British Columbia during the same year.
Clearly, small and mid-sized businesses (SMEs) are Canada’s economic engine. SMEs must be nurtured and provided with economically fertile soil in order to flourish. Yet, every month, the federal government continues to disregard this cardinal economic rule by gouging small companies through a variety of direct and indirect taxation programs.
Why do they do this? Simply because they can.
Currently, $46 billion has been wrongfully extracted from lower- and middle-income workers and their employers. These are the funds surplus to EI’s requirements. The EI program is a cash cow for the federal government and is used regularly to support other programs. This was not the intent of the Employment Insurance Act.
The legislation was intended to build up enough surplus money to pay one year’s anticipated benefits with a small cushion saved for a rainy day – and no more. The Liberal government’s cavalier and total disregard for the act has been drawn to the attention of Prime Minister Paul Martin and his government colleagues by federal Auditor General Sheila Fraser in each of the last five annual reports to Parliament.
Goodale and company, as a result of the auditor general’s pressure, moved to remedy this publicly illuminated transgression by announcing cuts effective Jan. 1, 2005.
What was the federal government’s remedy? Employees will see a reduction in their premium from $1.98 to $1.95 per $100 of insurable earnings, while employers will see a reduction from the current $2.77 per $100 of insurable earnings to $2.73.
Fraser, citing a study conducted by the chief actuary of the federal Human Resources Department in 2001, noted that about $15 billion – not $45 billion – would be the appropriate funding level for the EI program.
The business community is livid.
And so, while Martin is busy trying to figure out how to spend Ottawa’s embarrassingly large record surpluses, owners of Canada’s SMEs are trying to figure out how to meet their payroll comes to the New Year. At the same time, their employees struggle daily as their paycheques are pinched.
It’s time for the government to get its hands out of the pockets of working people. This is a hidden tax on employers and employees that, combined with the growing proliferation of user fees, direct and indirect taxes and other innovative revenue-generating bureaucratic initiatives, hurt job creation and threaten the economic health of Canada. This blatant disregard for the financial well-being of small and mid-sized businesses has provoked rage across the country.
Garth Whyte, executive vice-president of the Canadian Federation of Independent Businesses – which represents 100,000 small and mid-sized firms – is critical of Ottawa’s latest plan. “It’s not what our members were hoping for or deserve,” Whyte says. “The government has broken all of its own principles for setting rates in order to continue pouring EI premiums into its budget surpluses.
“Today’s announcement was cooked up behind closed doors and ignores the chief actuary’s recommendation that the break-even point could be up to 10 cents lower than what has been announced,” Whyte notes.
“This means that on top of amassing over $46 billion surpluses in EI premiums, and after the auditor general called for better management of the fund, the government is determined to continue this unfair tax on jobs. Our analysis shows the government is holding back a minimum of $300 million in premiums that will flow into general revenues.”
Martin and his counterparts in B.C. should understand there is neither magic nor commendation in creating surplus budgets in this fashion. And Goodale and other political leaders must know that it is not their money – it belongs to the nation’s hard-working citizens.
The surplus cash must be returned to the rightful owners – small and mid-sized companies and the average working Canadian – now.
Note: This article was originally published in 2005.
