CPP Introduction: It’s the Wrong Time

January 1 is the introduction date for the CPP2.  A new tier of premium increases begins for higher income earners.  It’s 4% more on contributory earnings between $65,000 and $73,200 – for a maximum additional premium of $188.  That’s on top of a $3754.45 premium (5.95%) on the first $65,000 of contributory earnings.  The self-employed pay both the employer and employee portions to a maximum of $8111.   Knowledge Bureau Report asked its readers:  in your opinion, will the CPP2 premium increase starting January 1, 2024 cause financial hardship to employers and employees? Overwhelmingly the answer was yes: 88%.  Here were some of the reasons why:

Joanne Thomas weighed in:  Small business will bear the brunt of increases again.  Seems every new change is directed to make small business pay more.

Jodi agrees:  Of course it will.  The self-employed will take the biggest hit.  Again.

Kimberly Gamble notes:  Yes this extra/increased payroll tax will hurt everyone as 3/4 of Canadians are just getting by and losing more of their paycheques isn’t good; now employers are paying more,  costs will increase again to point no one can do anything. 

Gaetan Ladouceur muses:  It is common in the business industry that most increases in operating costs (ie: payroll costs) are passed down to the consumer.  So, this increase in CPP premiums will be borne by the consumer through higher product and services prices.  This inflationary increase will reduce the net value of the eventual higher CPP pension to be received.  So, is increasing the CPP premium really the answer?  I would suggest that a reciprocating tax be reduced (ie: HST) to cover the additional investment in CPP. Burdening business and taxpayer with higher taxes and premiums will only make current financial matters worse.

Mark Houghting agrees:  Just another tax increase that will hurt self employed individuals and small businesses.  I really did not vote for a socialist government and hopefully we can back to some fiscal responsibility from our leaders.

From Bruce LaPorte:  High inflation and income levels are not keeping pace -  will add additional pressure to the taxpayers shrinking disposable income because the paycheck is swallowed by the other additional increases in living expenses. Something has got to give here.

Malgorzata Kania says:  CPP premiums will hurt everybody. Our government needs to invest better, listen to the right people, plan for the future and put more money in education system to teach about finances

Veronique Dewilde thinks it’s time for change:  Another money grab of the government! This so called enhanced CPP will not keep seniors out of low income, as by the time the money is paid out, the cost of living will have been increased to the level it is now, so nothing will change. We need to follow the Alberta example: have a provincial pension, that is reasonable!

Jerome Chung disagrees with the increases too:  This is not helping with the CPP but causes higher inflation and cost either to employees or consumers.  We are already in a severe recession.

Holly Atwood really dislikes the increases:  I hate this. The full benefit is not to be expected until one has contributed at these rates for 40 years. I hope to be retired by then, so I will not enjoy the full benefit of what I am paying. Nor will I have a CPP holiday at the end of next year. So many middle class people will be affected, but I feel this is minor in comparison to what the employers will have to cover. It is a lot of work for payroll professionals and payroll software suppliers. They will recoup this cost at the expense of business owners. I never understood why give a CPP exemption?  Why not a smaller percentage from dollar one and don’t have a ceiling. Easy!

Final word goes to Robert Litschel:  Most people have not received huge increases in wages or salary.  Any increases in payroll taxes hit them harder.  Businesses as well need to find the additional income to pay the taxes.  An additional concern I have is whether those with the higher incomes that will get hit by the increased CPP2 rates will be able to expect a commensurate increase when they are able to receive the benefits.  That is, if they have to contribute an extra couple of percentage points (4%, I believe) will they be able to count on getting at least 4% higher payments when they take CPP?  I wonder… nobody has mentioned anything about that.

Thank you to all who have contributed to this discussion.  Please weigh in on the January Poll: The government’s Underused Housing Tax consultations ended January 3.  Should the UHT stay or should it go?