Canada's economy

[msj]

msj, your reasoning is correct when applied to (private) car, house or life insurance. Your logic doesn't work in the case of (public) EI. EI is not insurance, it's a transfer scheme and so the trick is to game the system: where possible, avoid contributions and receive the transfer.

Ordinary Canadians are smart people and they have done exactly that.

Sure, the problem being that a self-employed person doesn't pay in so they don't get receive benefits.

Yes, there is always going to be the exception of blatant fraud going on.

But that is a tiny minority situation where we are talking about complete fraud (under the table dealings) that is best called "casual labour" which is more akin to employee earnings (albeit, under the table) than self-employed earnings.

We could spend billions of pixels discussing various tax evasions - and most of them are far more profitable and more worthwhile then the exaggerated nonsense whowhere is going on about (and, no, I'm not sharing my knowledge with any of you because I'm far too honest).

[August1991]

Maybe your shite is flying today but it wouldn't have flown in 2002 when I was looking at self employment. Revenue Canada made it clear 5 different revenue streams period.

5? Why 5? Why not 4, or 6?

BTW, I know many people who are self-employed (for tax purposes) who invoice one company. Maybe Quebec has different rules.

The logic for self employment was there was not enough work for a company to have someone doing that work full time so a self employed person came in and did that work part of the time and the rest of the 40 hours worked at getting more work or worked elsewhere.

I think the logic for self-employment is the same as the logic for not-marrying (and shacking up instead). Both sides reduce their contractual obligations.

Our labour/family law is so convoluted that many people now prefer to seek other, private arrangements. They prefer other means to arrange their affairs.

In both labour tribunals and family law, the Canadian State has mistakenly gotten involved in private matters.

Edited August 11, 2009 by August1991

[August1991]

Sure, the problem being that a self-employed person doesn't pay in so they don't get receive benefits.

Yes, there is always going to be the exception of blatant fraud going on.

It's not fraud, blatant or not. It's perfectly legal.

We use our EI system to pay pregnant women part of their maternity leave - but only women who are entitled to EI benefits. Why? Moreover, how many women lobbied/chose to become salaried employees prior to becoming pregnant?

There are bizarre rules to determine eligibility for EI. It depends on the region, and the number of hours worked using different calculations of an "hour".

How many firms use EI as part of their retirement package?

In short, our EI system is not insurance at all. It is a bizarre transfer scheme. Contributions are regressive. Paul Desmarais and I make the same contribution.

[msj]

It's not fraud, blatant or not. It's perfectly legal.

We use our EI system to pay pregnant women part of their maternity leave - but only women who are entitled to EI benefits. Why? Moreover, how many women lobbied/chose to become salaried employees prior to becoming pregnant?

It also pays men, too.

That must really leave you PO'd.

In short, our EI system is not insurance at all. It is a bizarre transfer scheme. Contributions are regressive. Paul Desmarais and I make the same contribution.

Sure it's a transfer scheme. Never said it wasn't.

And you are more likely to receive EI than Paul Desmarais if only because he would receive such a huge severance package that it wouldn't be worth his while to bother with EI.

[August1991]

And you are more likely to receive EI than Paul Desmarais if only because he would receive such a huge severance package that it wouldn't be worth his while to bother with EI.

I'm not quibbling about the amount Desmarais or I would receive from EI if we were to become unemployed.

I disagree that Desmarais and I both contribute the same to EI. When it comes to income tax, Paul Desmarais pays a heck of alot more than I do. But when it comes to EI, we pay exactly the same. Why?

EI contributions aren't even a flat tax. They're a head tax. After $40,000 or so, everyone pays the same fixed amount. The EI contribution is the same whether you earn $50,000 or $500,000. (The same logic applies to CPP/RRQ BTW.)

This is not small potatoes. Take a look at your next pay slip and see how much is taken off for EI and CPP. These payroll taxes are regressive, and they also raise the cost of hiring employees.

-----

We really need a thread on Employment Insurance reform.

Edited August 11, 2009 by August1991

[OddSox]

Dancer, you may think its irrelevant but those people that have paid into EI and can't collect for whatever reasons, are being cheated and then are going to be forced to go on welfare and then YOU and all working people will see their EI premiums double, if not triple and taxes will go up when the case loads of welfare increases.

Um, you do realize that both EI payments and welfare payments are paid by the same person - the taxpayer?

[msj]

I disagree that Desmarais and I both contribute the same to EI. Paul Desmarais pays a heck of alot more income taxes than I do. So why do he and I make the same contributions to EI?

EI isn't even a flat tax. It's a head tax.

Awww. That's too bad.

Maybe you should vote Conservative next time.

Oh, wait.....

---------------------------

Of course, you could always become self-employed so you don't pay into EI.

As you know from a previous thread, you could also become self-employed and incorporate a company and find a creative way or two to not only skip out on EI but avoid paying CPP too!

So, just do it!

Oh, wait.....

[tango]

I'm not quibbling about the amount Desmarais or I would receive from EI if we were to become unemployed.

I disagree that Desmarais and I both contribute the same to EI. When it comes to income tax, Paul Desmarais pays a heck of alot more than I do. But when it comes to EI, we pay exactly the same. Why?

Because there's a cap on what you can receive from EI.

[August1991]

Of course, you could always become self-employed so you don't pay into EI.

As you know from a previous thread, you could also become self-employed and incorporate a company and find a creative way or two to not only skip out on EI but avoid paying CPP too!

So your back to that argument, msj. (I love accountants. They always have a scheme. Lawyers are worse - they always point to potential liabilities.)

Look, msj. I could move to Florida and avoid EI/RRQ completely - but then I'd also have to eat lousy food.

IOW (and this is a profound point), the government can change ownership but the choices remain the same - if markets work. In Canada today, on average, there is no monetary advantage in becoming self-employed (assuming there had been one) because hourly pay for self-employeds have adjusted to any tax-advantage. The gain has been dissipated, lost.

And so for me, there is no advantage in changing my status.

The daughter of the king may be ugly or beautiful: the beautiful princess will still go to the most charming prince.

Edited August 11, 2009 by August1991

[msj]

IOW (and this is a profound point), the government can change ownership but the choices remain the same - if markets work. In Canada today, on average, there is no monetary advantage in becoming self-employed (assuming there had been one) because hourly pay for self-employeds have adjusted to any tax-advantage. The gain has been dissipated, lost.

And so for me, there is no advantage in changing my status.

I suppose.

I do know that there was a huge advantage for me to go from a senior employee to an incorporated partner.

Both in earnings and in tax savings.

I guess that extra money that I'm earning is the "risk premium" I get for taking on the potential liabilities of being self-employed.

But then, I have never been a fan of efficient markets - they are utter BS.

[August1991]

Because there's a cap on what you can receive from EI.

True. And there's also a cap on our use of Trudeau International Airport - we can't go there more than 365 days in a year.

Tango, I am not disputing how we use the system. I am disputing how we contribute to it.

Our income tax system is designed so that people like Paul Desmarais pay/contribute a heck of alot more (alot more) than you or I. But our EI and CPP/RRQ systems are different: Desmarais pays/contributes the same amount as I do. Our EI/CPP/RRQ contributions amount to a tax system in which you, I and Paul Desmarais all pay about $3000. It's a head tax.

IF EI/CPP/RRQ were small amounts, like parking tickets, I could live with it. But EI/CPP/RRQ contributions are not small amounts. Take a look at your pay slip.

Ordinary Canadians, people earning less than $30,000 annually (to pick an arbitrary number), should not make EI/CPP/RRQ contributions. People like Desmarais should give more, as they do through income tax.

Edited August 11, 2009 by August1991

[August1991]

But then, I have never been a fan of efficient markets - they are utter BS.

You get my point msj. Efficient implies that all these adjustments happen quickly. In fact, it means that the adjustments happen faster than someone like me can figure them out and benefit from them. EMH just means that most of us are behind the curve, assuming the market creates best available prices.

I do know that there was a huge advantage for me to go from a senior employee to an incorporated partner.

Both in earnings and in tax savings.

I guess that extra money that I'm earning is the "risk premium" I get for taking on the potential liabilities of being self-employed.

In theory. But if the benefit/differential has existed for decades, then I'd say that it's the equivalent of a banker's salary rising after 20 years of service. Only an honest person would suffer low salary/poor conditions for 20 years to gain a benefit. Dishonest people want a quick buck and would never tolerate typical bank pay scales - low at first for long, high at the end. Edited August 11, 2009 by August1991

[tango]

True. And there's also a cap on our use of Trudeau International Airport - we can't go there more than 365 days in a year.

Tango, I am not disputing how we use the system. I am disputing how we contribute to it.

Our income tax system is designed so that people like Paul Desmarais pay/contribute a heck of alot more (alot more) than you or I. But our EI and CPP/RRQ systems are different: Desmarais pays/contributes the same amount as I do. Our EI/CPP/RRQ contributions amount to a tax system in which you, I and Paul Desmarais all pay about $3000. It's a head tax.

IF EI/CPP/RRQ were small amounts, like parking tickets, I could live with it. But EI/CPP/RRQ contributions are not small amounts. Take a look at your pay slip.

Ordinary Canadians, people earning less than $30,000 annually (to pick an arbitrary number), should not make EI/CPP/RRQ contributions. People like Desmarais should give more, as they do through income tax.

bfd

[August1991]

bfd

BFD? Boston Fire Department?

[msj]

You get my point msj. Efficient implies that all these adjustments happen quickly. In fact, it means that the adjustments happen faster than someone like me can figure them out and benefit from them. EMH just means that most of us are behind the curve, assuming the market creates best available prices.

In theory. But if the benefit/differential has existed for decades, then I'd say that it's the equivalent of a banker's salary rising after 20 years of service. Only an honest person would suffer low salary/poor conditions for 20 years to gain a benefit. Dishonest people want a quick buck and would never tolerate typical bank pay scales - low at first for long, high at the end.

And if you would be bothered to read the link rather than pontificate your nonsense then we would no longer be discussing this BS line of thinking.

[tango]

True. And there's also a cap on our use of Trudeau International Airport - we can't go there more than 365 days in a year.

Tango, I am not disputing how we use the system. I am disputing how we contribute to it.

Our income tax system is designed so that people like Paul Desmarais pay/contribute a heck of alot more (alot more) than you or I. But our EI and CPP/RRQ systems are different: Desmarais pays/contributes the same amount as I do. Our EI/CPP/RRQ contributions amount to a tax system in which you, I and Paul Desmarais all pay about $3000. It's a head tax.

IF EI/CPP/RRQ were small amounts, like parking tickets, I could live with it. But EI/CPP/RRQ contributions are not small amounts. Take a look at your pay slip.

Ordinary Canadians, people earning less than $30,000 annually (to pick an arbitrary number), should not make EI/CPP/RRQ contributions. People like Desmarais should give more, as they do through income tax.

Everyone who is employed contributes, in proportion to their earnings, up to the 'maximum insurable earnings', which is linked to the maximum payout.

Your complaint is pretty petty, imo.

[August1991]

And if you would be bothered to read the link rather than pontificate your nonsense then we would no longer be discussing this BS line of thinking.

I read the link quickly the first time Ritzholt posted it, and I went back to it when you linked.

The EMH supporters have strong similarities with the Jesuit astronomers of the 17th Century who desperately wanted to maintain the assumption that the Sun revolved around the Earth.

Link

This article really misses the point, and plays to the prejudices of many older superstitious people who have lost money. EMH (Efficient Market Hypothesis) is nothing at all like a medieval Catholic church.

[August1991]

Everyone who is employed contributes, in proportion to their earnings, up to the 'maximum insurable earnings', which is linked to the maximum payout.

Your complaint is pretty petty, imo.

Petty? 'maximum insurable earnings' means that Paul Desmarais, Peter Mainsbridge, you and I all give the same amount annually - about $2,000. Is that fair?

Should Wayne Gretzky and you give the same amount of money to the government for a benefit that (let's be honest) neither of you will ever receive?

IOW, with EI, the federal government is taking about $2,000 every year from all working Canadians (rich, poor, whatever - a head tax) and giving the money to a weird collection of people. Heck, Wayne Gretzky's wife may have got some of the money.

BTW, our CPP/RRQ system is no different - and both EI/CPP/RRQ contributions take up a big chunk of the salaries of low income Canadians. These payroll taxes are not negligible.

-----

We need a thread on EI and CPP/RRQ, specifically about contributions.

Edited August 11, 2009 by August1991

[msj]

I read the link quickly the first time Ritzholt posted it, and I went back to it when you linked.

Link

This article really misses the point, and plays to the prejudices of many older superstitious people who have lost money. EMH (Efficient Market Hypothesis) is nothing at all like a medieval Catholic church.

Yeah, you got to mention Ritholtz while missing out that it is written by good, old fashioned, Republican, John Mauldin.

It's not the article that misses the point....

EMH is nothing more than a pointy headed academic theory that only people who don't understand markets believe in (and to academic's credit - it appears that even few of them believe in it but, to their discredit, they still teach this crap in finance 101 - I remember being taught this years ago and thinking at that time it was crap).

Now, consider what happens when a market is less transparent....

[whowhere]

So what we have is ignatief wanting EI reform to include the so called self employed who purposely avoided paying their EI but now that the economy is soft the self employed are crying for EI benefits. I assert most self employed are really employees because they draw their pay from one source/company and these so called self employed ought to be investigated for cheating taxes.

If you listen to Ignatief he says to pay for reform and all the 800000 collecting EI, premiums will likely have to increase but the fact is the Liberals and Conservatives have stolen 50 Billion from those overpaid EI premiums. If the government wants to increase EI increase the cap from $40k to 60k. That should more than cover the cost of current EI being paid out and any retraining programs to move Canada out of third world horse and buggy country status.

When the stats says 800,000 represents 8.4 % unemployment that's a problem and requires investigating. How Can a Country of 34 million have only 9 million people working. This defies logic. How many millions are claiming to be self employed that ought to be assessed and deemed an employee by Governments?

When I say Canada's governance is corrupt, the numbers speak for themselves, but then, can we expect anything more from Mulroney's buddies the conservatives?

[msj]

So what we have is ignatief wanting EI reform to include the so called self employed who purposely avoided paying their EI but now that the economy is soft the self employed are crying for EI benefits. I assert most self employed are really employees because they draw their pay from one source/company and these so called self employed ought to be investigated for cheating taxes.

Why don't you link to anything to prove a point?

I have seen proposals that included the possibility for EI for the self-employed. Sure, it's on the table.

Also on the table is a reduction to the number of hours.

Looks like its everybody who's crying for EI benefits in a soft economy.

As for the self-employed cheating taxes - they aren't cheating if they are conducting a business per CRA guidelines which have already been linked to back on page 3.

When the stats says 800,000 represents 8.4 % unemployment that's a problem and requires investigating. How Can a Country of 34 million have only 9 million people working. This defies logic. How many millions are claiming to be self employed that ought to be assessed and deemed an employee by Governments?

When I say Canada's governance is corrupt, the numbers speak for themselves, but then, can we expect anything more from Mulroney's buddies the conservatives?

Once again no link to back anything up.

If the numbers speak for themselves then it is usually a good idea to give some meaningful numbers.

It looks to me like Canada has about 16.8 million people employed.

Here's a link indicating a relatively small self-employment rate in Canada compared to other countries.

Maybe you will also want to consider how many Canadians are retired or not of working age.

But I have to recommend you take a remedial course in math prior to such an undertaking.

[Jerry J. Fortin]

Once again folks are trying to compare apples to oranges. The tax load on a private citizen, an individual tax payer, is in fact much higher than on self employed folks. Those folks who are getting paychecks suffer from with holding taxes and pay every two weeks and then must attempt to claw back funds from the government at the end of the year using the current tax regime. Self employed folks pay either annually or quarterly, and even then they deduct expenses to reduce their tax load. Employees have expenses too, but they can't claim them.

What I am suggesting is that the system favours business, period.

[Riverwind]

The tax load on a private citizen, an individual tax payer, is in fact much higher than on self employed folks.

Not true. Self employeed pay twice as much CPP which is equivalent to a extra 5% income tax for someone making 40K/year.

Those folks who are getting paychecks suffer from with holding taxes and pay every two weeks and then must attempt to claw back funds from the government at the end of the year using the current tax regime.

If you have a full time job then you should not be owing/be owed any tax at the end of the year. If you are getting a significant refund then your employer is not deducting tax correctly. Paying quarterly is actually a much bigger burden if you don't have a fixed income (i.e. you have to guess what your income will average out to and pay base on that).

Employees have expenses too, but they can't claim them.

The only expense deductions that a self employed person gets are thoses which would be normally paid by an employer.

[msj]

Ah, once again the argument that somehow I'm better off than my employees because I deduct expenses.

I have to deduct expenses in order to make income.

If I didn't I wouldn't have any employees, for one.

Employees don't deduct expenses because they usually don't have to incur them in order to make their employment income.

I am not better off because I have deductions - to spend $1 to save 14 cents in tax still means that I'm out 86 cents.

Why are people so stupid when it comes down to this?

Yes, to the extent that a business is deducting personal expenses fraudulently, then there is an unfair benefit.

Of course, employees commit fraud too - unreported tips, personal usage of employees vehicle etc....

And no, I don't get to write off my suits or my vehicle expenses for driving to/from the office. Just like an employee doesn't get to do the same.

Edit - I'll add one more example of how I'm not better off than my employers based on the notion of deducting expenses.

We will spend, say, $100 per employee on the christmas party.

Ok, so that employee gets meals/drinks/gifts equivalent of $100 (and, per CRA guidelines, this is not a taxable benefit so it is not included in his/her income).

I get a $100 deduction which saves my company $14 in taxes.

Net cost to me $86.

Oh, but I'm so much better off for those $14 in tax savings! where's the icon for the smiley face hitting its head against the wall?

Edited August 12, 2009 by msj

[Craig1]

One thing that worries me and I will use my brother as an example hes a mechanical engineer and the outfit he works for only hired him because they have a quota of Canadians that they need to employ so all he does really is sit with his fingure up his butt all day. They have lots of work and jobs and they are all going to foreign workers they say they have more of a tallent pool to choose from , wich makes sense population wise if you compair Canada and China your going to find more smart brains in China. But what does that do for Canadians looking for jobs. And now with the proposed MOBILIZED labor scheduled by 2012 it means they won't be forced to secure any Canadian jobs so hows this going to fair with our economy?