August1991 Posted November 1, 2014 Report Posted November 1, 2014 (edited) Since Harper is back into the world of retail politics of jiggering around with the tax system to find enough votes to get a majority, I started thinking about another major change to our tax system. At present, EI costs about $20 billion annually. (These are payments to the unemployed and maternity leave.) This is roughly financed by EI premiums (about $500/job annually ) collected from employees/employers. This premium amounts to a bizarre, regressive tax. (It is $500 whether your income is $40,000 or $200,000 and it is a tax only on working people.) Each 1% of the GST raises about $7 billion. IOW, we could raise the GST to 8%, eliminate completely all EI premiums and maintain the EI programme/benefits as they are. What would be the effect? Well, first of all, the CRA bureaucracy/form filling of EI payments would be gone. (The GST bureaucracy/infrastructure is in place so whether the tax is 5% or 8%, collection cost would be the same.) As a payroll tax, EI premiums are job killers since they put a tax on precisely the thing governments want to create: jobs. Current EI premiums fall disproportionately on low-income workers. The GST exempts food and rent and falls on everyone, but more on high-spenders. Not only would this change be more "fair" but it would also reduce bureaucracy and encourage employment. Unfortunately, in the world of retail politics, I don't see any politician in Canada putting together a coalition of voters to benefit from a such a change. Harper is the only guy that seems to understand how to do this. Edited November 1, 2014 by August1991 Quote
Argus Posted November 1, 2014 Report Posted November 1, 2014 Each 1% of the GST raises about $7 billion. IOW, we could raise the GST to 8%, eliminate completely all EI premiums and maintain the EI programme/benefits as they are. I don't disagree that EI premiums are a tax on jobs. I would like to see them replaced wih income from other sources, and the GST is one which makes sense. However, at present, business pays half the cost of the EI system, and business gets to write off its GST expenses. This would thus present a multibillion dollar tax cut to business. I'm not in favour of that. I think we'd need to increase business taxes to make up for the money they'd save by cutting their EI contributions. Quote "A liberal is someone who claims to be open to all points of view — and then is surprised and offended to find there are other points of view.” William F Buckley
cybercoma Posted November 1, 2014 Report Posted November 1, 2014 EI is not a tax. It's insurance that covers a portion of your wages while you look for a new job when you lose one. Quote
Argus Posted November 1, 2014 Report Posted November 1, 2014 EI is not a tax. It's insurance that covers a portion of your wages while you look for a new job when you lose one. It's a tax which pays for a government social service and job subsidy. Quote "A liberal is someone who claims to be open to all points of view — and then is surprised and offended to find there are other points of view.” William F Buckley
eyeball Posted November 1, 2014 Report Posted November 1, 2014 It's a tax which pays for a government social service and job subsidy.No it is premium not a tax.That said EI should be replaced with a guaranteed income...paid for by a taxing the rich. Quote I said now watch what you say they'll be calling you a radical, a liberal, oh fanatical criminal
TimG Posted November 2, 2014 Report Posted November 2, 2014 That said EI should be replaced with a guaranteed income...paid for by a taxing the rich.Except there are not enough rich people. A 10% increase in taxes on people making more than 250K would be enough to pay for a GAI of $200/year. That is why any time a politician looks at a GAI they realize it is a really dumb idea. Quote
Bryan Posted November 2, 2014 Report Posted November 2, 2014 EI is not a tax. It's insurance that covers a portion of your wages while you look for a new job when you lose one. This. Only those with a job pay into it, only those who were paying in to it can collect it if they lose that job. It's insurance. Quote
cybercoma Posted November 2, 2014 Report Posted November 2, 2014 This. Only those with a job pay into it, only those who were paying in to it can collect it if they lose that job. It's insurance.And there's very particular circumstances you have to meet in order to collect and you can only keep collecting as long as you meet their requirements and report to them bi-weekly. Quote
BC_chick Posted November 2, 2014 Report Posted November 2, 2014 As a payroll tax, EI premiums are job killers since they put a tax on precisely the thing governments want to create: jobs. One, as pointed put, EI is not a tax, it's a premium. That's why its calculated on *insurable* hours and earnings. Two, the deduction is very minimal compared to CPP and income tax so it's not exactly a burden to the tax-payer compared to other source deductions. And as far as the employer contribution goes, it's 2.5% compared to CPP's almost 5%. Heck, even vacation pay costs employers more than EI premiums do. I'm really not sure how you figure EI is a 'job killer'. Quote It's kind of the worst thing that any humans could be doing at this time in human history. Other than that, it's fine." Bill Nye on Alberta Oil Sands
August1991 Posted November 2, 2014 Author Report Posted November 2, 2014 (edited) No it is premium not a tax. That said EI should be replaced with a guaranteed income...paid for by a taxing the rich. The "premium" (as you call it) is a deduction from an employee's paycheque - a tax by any other name. (Indeed, employers also have to pay this premium/tax for every employee they hire.) Eyeball, I'll set aside your idea of a guaranteed income for a future thread but my idea of shifting the burden of EI payments from "premiums" to the GST does exactly as you wish: it taxes the rich. EI "premiums" tax the working poor whereas the GST taxes the "buying rich". ... the deduction is very minimal compared to CPP and income tax so it's not exactly a burden to the tax-payer compared to other source deductions. And as far as the employer contribution goes, it's 2.5% compared to CPP's almost 5%. Heck, even vacation pay costs employers more than EI premiums do.Very minimal? Speak for yourself. ===== As I noted in the OP of another thread, neither Mulcair nor Trudeau Jnr seem to be doing this Karl Rove/retail politics of policies/issues calculating benefits/costs/potential voters/critical ridings. For Harper, the only piece of the puzzle remaining is to ensure a good vote split between NDP and Liberal. Edited November 2, 2014 by August1991 Quote
Argus Posted November 2, 2014 Report Posted November 2, 2014 No it is premium not a tax. That said EI should be replaced with a guaranteed income...paid for by a taxing the rich. A premium is based upon the likelihood the insurance company or agency will have to pay out. This is not. If it were an insurance scheme those who make claims each and every single year would be dropped. Instead EI makes it easier for them. This is a government job subsidy program for fishermen, foresters, contractors and the like and a welfare program for Atlantic Canada. Quote "A liberal is someone who claims to be open to all points of view — and then is surprised and offended to find there are other points of view.” William F Buckley
Topaz Posted November 2, 2014 Report Posted November 2, 2014 I think workers should have a choice if they want to pay into EI because not all workers can draw from it, but I understand why the government doesn't offer this because they use EI surplus for other things. Also, if you pay into EI and never ever draw from it then perhaps you should get some or all that money back in CPP or OAS payments. Quote
Bryan Posted November 2, 2014 Report Posted November 2, 2014 A premium is based upon the likelihood the insurance company or agency will have to pay out. This is not. If it were an insurance scheme those who make claims each and every single year would be dropped. Instead EI makes it easier for them. This is a government job subsidy program for fishermen, foresters, contractors and the like and a welfare program for Atlantic Canada. People do get dropped from EI if their claims aren't valid. It's no different than my car insurance. I have to pay for it, no choice. If my car gets damaged through no fault of my own, there's no limit to how many claims I can make. It's only if it can be proven that I'm intentionally abusing the system that I might get cut off -- and even then it would probably be in conjunction with a driving suspension and/or criminal charges. Quote
Argus Posted November 2, 2014 Report Posted November 2, 2014 People do get dropped from EI if their claims aren't valid. It's no different than my car insurance. I have to pay for it, no choice. If my car gets damaged through no fault of my own, there's no limit to how many claims I can make. It's only if it can be proven that I'm intentionally abusing the system that I might get cut off -- and even then it would probably be in conjunction with a driving suspension and/or criminal charges. Your comparison is nonsense. You make one claim and your rates go up. You make another soon and you're likely to be dropped, and your payments will go way up. Make several and they'll drop you like a rock and nobody else will take you on for any amount. The EI system is designed as an income support system. That's why people in certain industries can use it every single year without a problem. Because it's designed for that. You don't pay more if you claim every year. You don't pay more if you live in an area of higher unemployment. Instead your requirements for weeks of work to qualify actually go down! I'd like to see an insurance company that cut your rates because you live in an area of high crime, where cars are often stolen and where there are often accidents. Ha! Quote "A liberal is someone who claims to be open to all points of view — and then is surprised and offended to find there are other points of view.” William F Buckley
Bryan Posted November 2, 2014 Report Posted November 2, 2014 (edited) Your comparison is nonsense. You make one claim and your rates go up. You make another soon and you're likely to be dropped, and your payments will go way up. Make several and they'll drop you like a rock and nobody else will take you on for any amount. None of those things ever happen here. As long as your claims are legitimate, nothing about your coverage or payments changes. Edited November 2, 2014 by Bryan Quote
eyeball Posted November 2, 2014 Report Posted November 2, 2014 (edited) The EI system is designed as an income support system. That's why people in certain industries can use it every single year without a problem. It's just as true to say the EI system is also designed to be a support system for industries - many of which would perish without a pool of employees on call. So enter the TFW program - an employer "insurance" scheme so to speak that many seasonal industries and now year round industries use all the time without a problem. Talk about abusing the system. Edited November 2, 2014 by eyeball Quote I said now watch what you say they'll be calling you a radical, a liberal, oh fanatical criminal
overthere Posted November 3, 2014 Report Posted November 3, 2014 This. Only those with a job pay into it, only those who were paying in to it can collect it if they lose that job. It's insurance. No, only those who work for somebody else pay into it. It insurance for those people only. Quote Science too hard for you? Try religion!
overthere Posted November 3, 2014 Report Posted November 3, 2014 People do get dropped from EI if their claims aren't valid. It's no different than my car insurance. I have to pay for it, no choice. If my car gets damaged through no fault of my own, there's no limit to how many claims I can make. It's only if it can be proven that I'm intentionally abusing the system that I might get cut off -- and even then it would probably be in conjunction with a driving suspension and/or criminal charges. Your insurance company can decline to insure you, though you will never get them to admit that the reason is too many claims. Or maybe you live in a place with govt insurance, so everybody pays for your claims. Quote Science too hard for you? Try religion!
Argus Posted November 3, 2014 Report Posted November 3, 2014 No, only those who work for somebody else pay into it. It insurance for those people only. Like fishermen and loggers, you mean? Quote "A liberal is someone who claims to be open to all points of view — and then is surprised and offended to find there are other points of view.” William F Buckley
Bryan Posted November 4, 2014 Report Posted November 4, 2014 Your insurance company can decline to insure you, though you will never get them to admit that the reason is too many claims. Or maybe you live in a place with govt insurance, so everybody pays for your claims. You're halfway there. Yes, I do live in a place with public insurance, which is why I made the comparison to EI which is also public insurance. The part you're still wrong about is "everyone" paying my claims. Only those who pay for the insurance fund the claims, just like every other kind of insurance. No, only those who work for somebody else pay into it. It insurance for those people only. Which is exactly what I said. People who 'have a job' work for someone else, as opposed to self-employed people who are running their own business. Quote
eyeball Posted November 4, 2014 Report Posted November 4, 2014 Like fishermen and loggers, you mean? There's barely any of these even left to collect it anymore. Big Tourism in Canada would starve without it and they have more TFW's and immigrants to fall back on now so... Quote I said now watch what you say they'll be calling you a radical, a liberal, oh fanatical criminal
August1991 Posted November 4, 2014 Author Report Posted November 4, 2014 (edited) People do get dropped from EI if their claims aren't valid.About 15% of EI claims are maternity leave - so I have to agree with you, Bryan. Some women aren't really pregnant. But as Argus argues above, it's no longer an insurance scheme. It's an income transfer scheme. If our federal government is going to transfer money from person A to person B, then let's do it in a way that is "fair" and makes "Canada" work better. In my OP, I am not arguing with EI payouts. I argue only that the GST is a better way to collect the money to transfer than our current EI payroll deductions. Edited November 4, 2014 by August1991 Quote
PIK Posted November 4, 2014 Report Posted November 4, 2014 It is also a fund where liberal governments can take and call it a surplus. Quote Toronto, like a roach motel in the middle of a pretty living room.
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