A lump of coal would make a perfect belated stocking stuffer for federal politicians who kicked off the New Year with a payroll tax hike. This marks the twelfth straight year in a row that rising payroll taxes (Employment Insurance and Canada Pension Plan combined) have taken their toll on working-Canadian's pay stubs.

Employees who contribute the maximum amount to the employment insurance fund will see their employment insurance (EI) premiums drop by $39 in the coming year due to Ottawa's move to cut the EI rate by 10 cents for every $100 of insurable earnings. But that won't put more money in your pocket.

Canada Pension Plan (CPP) taxes are jumping again by 25 cents for each $100 of insurable earnings which works out to an annual increase of $128.60. Bottom line, workers will pay $90 more in payroll taxes 2003 than they did in 2002.

The more troubling story here is that payroll taxes have jumped by 45% since 1992. This outpaces inflation by a factor of almost two to one. The payroll tax burden for an average employee at $41,000 per year will be $817.20 higher in 2003 than it was in 1992 and $701.76 higher for the employer over the same period.

There is however one small glimmer of good news on the tax front for Canadian businesses. As of January 1st, the general corporate tax rate will decline by two percentage points from 25% to 23% on its way to 21% by 2004 as part of Ottawa's five-year tax reduction strategy. Paying less tax should help businesses reduce their own debts, reinvest and maybe even boost wages a bit.

The best way to protect your wages from the eroding affect of inflation is through indexation of tax brackets and credits. The elimination of "bracket creep," both federally and provincially (with a little help from the Canadian Taxpayers Federation) is still a recent phenomenon that helps working-Canadian's incomes keep pace with inflation.

The BC government is indexing tax brackets and credits by 1.7% for 2003. That represents BC's Consumer Price Index for the 12-month period ending September 30, 2002. And Ottawa will index federal tax brackets and credits by 1.6%

The first benefit to taxpayers is that a greater share of their income will be exempt from taxation. The 2003 indexation changes will raise the provincial basic personal exemption (BPE) from $8,168 (2002 level) to $8,307 and push the federal BPE from $7,634 (2002 level) to $7,756 in 2003.

Indexation will also drive up tax brackets meaning a greater portion of your income is taxed at the lower bracket rate. And that puts more money in your pocket to fight off cost-of-living increases.

Earlier this month, Statistics Canada reported that personal income taxes remained the single largest expenditure in the average household budget accounting for 21.2% of all expenditures. For the record, this is more than we spend on shelter (19%), transportation (13.2%) or food (11.1%). What about having fun

After paying all those taxes and buying the basics, a paltry 6.1% of household income is devoted to recreation. That's bad news for anyone thinking about a winter get-away.

The provincial government will leave you in peace but Ottawa will ground winter vacationers by squeezing more money out of their pockets from mercurial payroll taxes.