Juno News - Another tax hike for Canadians (ft. Dan Kelly)

00:00:00.000 I want to turn to some cost of living issues, which are very much affecting Canadians.

00:00:13.520 We spoke about inflation a fair bit last week, and I know we'll have a bit of a more in-depth

00:00:18.580 look at this in a couple of weeks with Franco Terrazzano of the Canadian Taxpayers Federation.

00:00:24.820 But I think one of the big things that it's important to identify here is that for most

00:00:29.980 Canadians who are grappling with inflation, there isn't just one instant snap-of-the-finger

00:00:36.800 solution.

00:00:37.540 There are a number of inputs here.

00:00:39.020 There's general inflation, supply chain issues, there are the increases to the carbon tax.

00:00:44.820 And one that doesn't often get discussed, but I think it's important here, is the increases

00:00:49.480 to payroll taxes, which if you're talking about thousands of dollars a year that Canadians

00:00:54.480 are spending more on groceries and taxes.

00:00:57.300 A few hundred a year in payroll taxes is quite significant.

00:01:01.280 The Canadian Federation of Independent Business is calling on the federal government to pause

00:01:06.500 the planned increase of EI and CPP premiums, which will take about $305 away from the average

00:01:15.840 Canadian worker next year.

00:01:17.560 Dan Kelly, president of the CFIB, joins me now.

00:01:20.960 Dan, good to talk to you.

00:01:21.980 Thanks for coming on today.

00:01:24.040 Do we have you there, Dan?

00:01:25.480 I can hear you.

00:01:26.880 Hope you can hear me.

00:01:27.740 Okay, perfect.

00:01:28.180 Sorry, we had a little bit of a technical issue there.

00:01:31.360 Let's talk about what this is first off.

00:01:33.820 These premiums go up every year, but we're also talking about a year that isn't exactly

00:01:38.700 business as usual economically for Canadian families.

00:01:41.640 No, I mean, typically there is an increase in the maximum amount that we can pay CPP and

00:01:49.680 EI on, but the rate generally has not risen.

00:01:53.700 In fact, for two years, the federal government froze the employment insurance rates because

00:01:58.100 they recognized the economy was in rough shape.

00:02:00.320 Canadians were struggling through the pandemic, and so they kept those rates frozen.

00:02:03.700 Now they've removed that cap on EI, and they're in the process of raising CPP rates significantly

00:02:10.940 over a seven-year period.

00:02:12.860 Those two things combined are going to raise employees' payroll taxes by over 6% this year.

00:02:20.620 As you said, about a $305 increase, up to a $305 increase for the employee, $325 increase

00:02:29.120 for the employer.

00:02:29.940 So your payroll on January 1 for most working Canadians will drop.

00:02:35.140 That's in the face of an environment where we're all dealing with the inflationary pressures

00:02:39.560 on everything that we buy.

00:02:41.260 We're seeing EICPP premiums rise, and then, as you noted, later in the spring, in most provinces,

00:02:46.940 an increase in the carbon tax as well as an increase in liquor taxes.

00:02:53.300 Do you recall in the last couple of years when the government put this freeze in, when that

00:02:58.020 decision was made?

00:02:59.540 What I mean by that, basically, is are we past that point where the government could easily

00:03:03.720 do something about this?

00:03:05.400 Look, the government could, even now, announce a freeze or retroactively take out the increase.

00:03:13.020 There are ways to do that.

00:03:14.440 In fact, in 2015 and 2016, the Liberals, just as they took power, put a two-year freeze on,

00:03:21.080 a two-year reduction plan for small businesses on their share of the EI bill.

00:03:25.900 That could happen as soon as Budget 2023.

00:03:28.560 So it's not too late.

00:03:30.180 But, you know, we're a couple of weeks away from January 1, and rates are expected to rise.

00:03:36.000 They did increase them.

00:03:37.420 The Liberals did increase EI, sorry, did increase Canada Pension Plan premiums in both COVID years,

00:03:43.580 in 2021 and 2022, they're doing it again this year, despite the fact we're all dealing with

00:03:49.740 wicked inflation levels.

00:03:51.360 You know, when you take 300 bucks out of somebody's take-home income, that's, you know, that's

00:03:55.740 a round or two of groceries for many Canadian families at a time when Canadians are really

00:04:02.300 struggling.

00:04:03.360 The benefits for CPP, the future benefits, they're going to be, that increase is going

00:04:08.200 to be phased in over the next 40 years.

00:04:11.540 So putting a one-year pause in place, we don't think is too tall in order.

00:04:16.480 Unfortunately, the government has ignored these calls and is moving ahead.

00:04:20.480 Now, if you're self-employed, you're getting hit on both ends of this, aren't you?

00:04:23.940 The employer and the employee side?

00:04:26.040 You're quite right.

00:04:26.840 You don't have to face EI premiums, but on Canada Pension Plan, you pay both the share

00:04:31.520 as the employee and you pay the share as the employer on self-employment income.

00:04:36.360 So you could have hundreds and hundreds of dollars of increased Canada Pension Plan

00:04:41.220 premiums, and the self-employed really were huge losers out of COVID.

00:04:45.560 For the business, of course, this is adding additional pressure.

00:04:48.500 I mean, we talk about the inflationary pressures on average Canadians.

00:04:52.980 For business owners, they're seeing that pressure on every line of their budget.

00:04:56.920 And, of course, with rising taxes, these payroll taxes, that obviously saps their ability

00:05:03.280 to provide raises for their employees to deal with the inflationary pressure that they're

00:05:07.220 facing.

00:05:07.660 So it's a pretty vicious circle right now.

00:05:10.080 I know that there's this vision that, I don't even know if it's an intentional one,

00:05:14.420 but this approach of the business owner as being the miserly one that doesn't want to

00:05:18.580 give their employees benefits.

00:05:20.140 And, you know, any small business owner I've ever spoken to would love to pay their employees

00:05:24.380 a lot more.

00:05:25.000 But sometimes they look at their balance sheet and that money just isn't there.

00:05:28.780 So when you're talking about, you know, a few hundred dollars per employee, if you've

00:05:32.720 got 10 employees, that $3,000 is not insignificant on some small businesses, is it?

00:05:38.660 It's not at all.

00:05:39.920 And look, I mean, we have to also put the context of what's happening right now.

00:05:44.920 Sure, the COVID restrictions are behind us.

00:05:47.420 But if you can believe it, only half of small businesses say that they are back to 2019 levels

00:05:52.500 of sales.

00:05:53.720 For many, they're not seeing customers return in the volume that they did pre-pandemic.

00:05:58.300 On top of that, just to get through the restrictions of the last two years, the average small firm

00:06:03.220 has taken on $110,000 in debt.

00:06:07.100 That's how much they now owe, exposed to higher interest rates that they're having to make

00:06:12.600 good on.

00:06:13.620 And they're seeing these cost pressures.

00:06:15.800 So lower sales, more debt at higher interest rates, and huge cost increases.

00:06:21.500 This is not the boom times that people were predicting coming out of COVID that many of

00:06:29.780 the articles were breathlessly talking about.

00:06:33.320 Sadly, for many small businesses, these remain pretty bleak times.

00:06:36.640 Small business optimism, if you can believe it, is actually fairly close to the low levels

00:06:42.380 it was at the beginning of the pandemic.

00:06:44.740 That's how bad it is for small businesses.

00:06:46.600 And yet, the federal government feels like this is a great time to jack up taxes.

00:06:51.240 Yeah.

00:06:51.680 I mean, there's always been that divide that people have seen between the financial economy

00:06:56.100 and the real economy.

00:06:57.240 Between the picture of the economy that you might see looking at the stock market, although

00:07:01.760 not always.

00:07:02.800 And what you see when you look on the ground.

00:07:04.760 And again, a lot of people have made billions in the pandemic, but for a lot of small business

00:07:10.940 owners, they haven't seen that.

00:07:12.160 They haven't seen that incredible financial success story that Amazon has.

00:07:17.380 No.

00:07:17.880 Well, look, restrictions really hit independent businesses particularly hard, especially in

00:07:22.700 retail, hospitality, the service sector, arts and entertainment, travel and tourism.

00:07:27.500 These were the sectors that were most directly affected by COVID restrictions.

00:07:31.020 They took it on the chin to try to get through.

00:07:33.880 Yes, there were government support programs in place, but our data shows that only about

00:07:38.460 one-third of the cost to business was covered by COVID subsidies.

00:07:42.940 Two-thirds was borne by the business itself.

00:07:45.840 This is deeply unfair at this stage.

00:07:48.800 And business owners are saying, look, give us a bit of a breather here before you start

00:07:52.240 to return to raising taxes.

00:07:55.220 You add to that the carbon tax increase that we're expecting in April.

00:07:59.580 And for small businesses, that's especially deadly.

00:08:02.780 Small firms don't qualify for any of the rebates that supposedly are there for consumers.

00:08:08.280 They basically are just payers of the carbon tax itself.

00:08:12.060 Liquor tax increases affect hospitality and some in the retail sector.

00:08:17.520 We need to make sure that Canadians have dollars to spend in businesses.

00:08:21.760 We're not doing a lot to help them.

00:08:23.920 I know that you have obviously called first and foremost for a freeze on these increases.

00:08:30.240 Another idea is putting forward a refundable tax credit.

00:08:34.500 You mentioned 2015-2016 on that.

00:08:37.380 The freeze would be, in your view, the ideal response, correct?

00:08:41.000 Yeah, absolutely.

00:08:41.960 Look, our first choice is to put the brakes on the increase that is expected for January 1.

00:08:47.160 I'm not optimistic that that's going to happen, only two weeks away from the new year.

00:08:53.340 But, you know, that would be the best course of action for the federal government to take.

00:08:58.320 But there are ways, even after that, to try to offset these costs.

00:09:02.800 Even if they're not going to offset them for average Canadians,

00:09:05.340 trying to remove some of the payroll burden on Canadian employers would be helpful.

00:09:09.920 And there are ways, through a mix of credits, tax reductions, and other ways,

00:09:14.260 that the federal government can come to the aid of small and medium-sized firms.

00:09:18.820 You know, we've got all sorts of pressures right now,

00:09:21.800 and we need to get a few of them taken off our list.

00:09:25.460 Have you found that Christopher Freeland, the finance minister,

00:09:28.540 actually hears you out when you've brought these concerns historically?

00:09:31.260 Or do you find that the government is just completely detached

00:09:34.000 from the reality of what small business owners are facing?

00:09:37.560 Well, look, I've been doing this a long time.

00:09:39.920 And when the Liberals took office,

00:09:42.580 there was no secret that the finance minister, Bill Borneau,

00:09:46.300 did not listen one bit to the concerns of small business owners.

00:09:51.140 And that's when the CPP increase plan was first hatched.

00:09:55.600 It was negotiated, and I will say,

00:09:58.500 criticism of the federal government alone does not set CPP rates.

00:10:02.580 Many provincial governments, including conservative provincial governments,

00:10:05.460 supported the increase in the Canada Pension Plan.

00:10:07.760 We're trying to convince some of those same governments to put pause, to press pause.

00:10:13.040 When the deputy prime minister, when Christy Freeland took the reins in finance,

00:10:17.040 she did listen to many of our requests over the course of the pandemic,

00:10:21.420 some of the work that we did to try to make sure that there were effective subsidy programs in place for small business.

00:10:27.200 But that remains incomplete.

00:10:29.200 And right now, what businesses need is a little bit of relief.

00:10:32.480 There was, in the fall economic statement, a plan to reduce credit card processing fees.

00:10:37.340 That's good news.

00:10:38.580 I'm hoping to be speaking to her before the holidays in the next couple of days.

00:10:42.240 And we'll be putting this request to her once again to see if small firms can get at least some relief

00:10:49.000 from the massive pressures that Otto is imposing right now.

00:10:52.880 I wasn't going to go there, but since you mentioned credit card processing fees,

00:10:56.420 I don't know if a lot of consumers realize how disruptive those are to businesses.

00:11:01.620 Oh, gosh.

00:11:03.360 You know, the average consumer, of course, thinks that the credit card industry is funded

00:11:06.720 through the annual fee that they might pay to get a premium card

00:11:10.520 or is funded by the interest that they might pay if they carry a balance on their credit card.

00:11:15.760 What they don't know, for the most part, is that every time that card is swiped or chipped,

00:11:21.260 the merchant pays a fee somewhere in the range of 1.5% to 2.5% of the sale

00:11:26.000 for the courtesy of making that transaction happen.

00:11:28.620 That's somewhere in the range of $5 to $10 billion a year that Canadians pay

00:11:34.160 that is embedded in the prices of everything that we buy.

00:11:37.280 And those fees, sadly, in Canada are among the highest in the world.

00:11:42.480 So it is good that the government has talked about finding ways to lower the pressure of these fees

00:11:47.400 on average Canadians.

00:11:49.840 We're working to make sure that that actually happens,

00:11:52.260 putting some ideas forward to government, to Visa, to MasterCard.

00:11:57.340 But the pressures are there.

00:12:00.380 The rewards that, you know, your free trip to Florida that you may never get,

00:12:04.200 that's funded by consumers that are paying with cash, paying with debit.

00:12:08.980 So it's actually, in many ways, a wealth transfer from low-income Canadians

00:12:12.660 that pay with cash and debit to wealthier Canadians that have one of these premium credit cards.

00:12:17.860 That's something that I think very few understand.

00:12:19.860 Yeah, and I'm guilty of it as well, because don't get me wrong,

00:12:23.440 I've got credit cards that, you know, give me AeroPlan points, and I use those things.

00:12:27.360 But it's not coming out, like, you know it's not being conjured out of thin air.

00:12:31.920 Someone is paying for that.

00:12:33.760 You got it.

00:12:34.260 That's the merchant, ultimately.

00:12:36.520 And then that gets passed back to the consumer.

00:12:38.440 So we think that a fairer system would be to keep these fees low,

00:12:43.860 as is the case in many other countries in the world.

00:12:46.580 The reward schemes are still there.

00:12:48.800 But it's unfair that the merchant has to pay for the reward schemes,

00:12:53.520 the customer loyalty schemes that really do reward the banks

00:12:56.640 and the customers of the banks in the end.

00:13:00.100 That's not the way that this is supposed to work.

00:13:03.080 All right.

00:13:03.860 So here's, I guess, where we get down to the action item here.

00:13:06.560 We're looking at this increase going in January 1st,

00:13:09.800 and I think you mentioned earlier that technically there are options after January 1st,

00:13:14.300 but this is really the crunch time if there's going to be a freeze,

00:13:17.660 most likely, on these increases in premiums, correct?

00:13:21.220 You got it.

00:13:21.940 And we have a petition on our website right now,

00:13:24.280 directed at the federal government and provinces,

00:13:26.800 to press pause on the EI and CPP premium increases that are expected,

00:13:31.120 that are planned for January 1st.

00:13:32.860 Again, I think, you know, one of my observations about Canadians

00:13:36.720 is we actually don't mind paying higher taxes.

00:13:39.180 We actually don't mind fees.

00:13:41.140 We just don't want to know about it.

00:13:43.040 And that's the problem with CPP and EI.

00:13:45.340 Because it comes off our paychecks,

00:13:47.140 most people, it flies right under their radar.

00:13:49.620 And then they realize in January,

00:13:51.380 hey, I'm a little bit poorer,

00:13:53.100 not drawing the connection, sadly,

00:13:55.340 between the policies that the government's putting in place

00:13:57.940 and their bottom line.

00:14:00.380 All right.

00:14:01.060 And yeah, certainly, I know a lot of,

00:14:02.640 I get a lot of emails from people who are self-employed.

00:14:04.700 You'll certainly see both ends of that as well.

00:14:07.340 Dan Kelly,

00:14:07.960 President of the Canadian Federation of Independent Business.

00:14:10.840 Thanks very much.

00:14:11.680 And that petition is on the CFIB website.

00:14:14.420 So have a good one, Dan.

00:14:15.720 Merry Christmas to you.

00:14:17.060 You too.

00:14:17.480 Thanks so much.

00:14:18.140 Thanks for listening to The Andrew Lawton Show.

00:14:20.420 Support the program by donating to True North

00:14:22.400 at www.tnc.news.

00:14:25.800 www.tnc.news.com

Juno News - December 14, 2022

Another tax hike for Canadians (ft. Dan Kelly)

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