-- EI Rate Cut Dwarfed by CPP Premium Increases --

OTTAWA: The Canadian Taxpayers Federation (CTF) has calculated the net effect of the EI rate cut and CPP premium increases for a Canadian employee earning $39,000 per year.

"The payroll tax burden on Canadians will become heavier in 1999," said CTF Federal Director Walter Robinson. "Even with the EI rate cut, Canadians will pay up to $59 more in payroll taxes next year. Employers will also foot an extra $35 in payroll taxes."

The CTF has produced a quick fact sheet exposing the government's payroll tax shell game. While EI rates have been cut by 15 cents, CPP premiums are being hiked by 30 cents as of January 1, 1999.

"It's time Martin and Pettigrew were honest with Canadians about increasing payroll taxes. To boast about the so-called relief they are giving is fundamentally dishonest," concluded Robinson.



QUICK FACTS


-- An employee (@ $39,000) will pay $59.20 more in payroll taxes in 1999.
-- Employers (for a $39,000 salary) will pay $35.80 more in payroll taxes in 1999.

Calculations -- Employee @ $39,000
1998 CPP contributions, $1,068.80
1999 CPP contributions, $1,186.50 Increase in CPP taxes $117.70

1998 EI contributions, $1,053.00
1999 EI contributions, $ 994.50 Decrease in EI taxes $58.50

Net increase in employee payroll taxes $ 59.20

= = = = = = = = = =

Calculations -- Employers (for employees @ $39,000)

1998 CPP contributions, $1,068.80
1999 CPP contributions, $1,186.50 Increase in CPP taxes $117.70

1998 EI contributions, $1,474.20
1999 EI contributions, $1,392.30 Decrease in EI taxes $81.90

Net increase in employer payroll taxes $ 35.80

= = = = = = = = = =

DETAILED CALCULATIONS

Employee earning $39,000 in 1998 and 1999:

CPP:*
1998. $36,900 minus $3,500 Yearly Basic Personal Exemption. ($33,400 x..032) = $ 1,068.80.
1999. $37,400 minus $3,500 Yearly Basic Personal Exemption. ($33,900 x..035) = $ 1,186.50
$ 1,186.50 - $ 1,068.80 = $ 117.70 increase.
EI:
1998. $39,000, all of it subject to EI taxes. (39,000 x .027)= 1,053.00.

1999. $39,000, all of it subject to EI taxes. (39,000 x .0255)= 994.50.

$ 1,053.00 - $ 994.50 = $ 58.50 decrease.

Net Result: Payroll taxes will increase by $ 59.20 in 1999 for a $39,000 salary.

= = = = = = = = = =

Employer (for employee @ $39,000 in 1998 and 1999):

CPP:
1998. $36,900 minus $3,500 Yearly Basic Personal Exemption. ($ 33,400 x ..032) = $ 1,068.80.
1999. $37,400 minus $3,500 Yearly Basic Personal Exemption. ($ 33,900 x ..035) = $ 1,186.50
$ 1,186.50 - $ 1,068.80= $ 117.70 increase.

EI:
1998. $39,000, all of it subject to EI taxes. ($ 39,000 x .0378) = $1,474.20.
1999. $39,000, all of it subject to EI taxes. ($ 39,000 x .0357) = $1,392.30.
$1,474.20 - $1,392.30 = $ 81.90 decrease.

Net Result: Payroll taxes will increase by $ 35.80 in 1999 for the employer.

= = = = = = = = = =

Explanatory notes:

CPP: Canada Pension Plan taxes are scheduled to rise from 6.4% (1998) to 7.0 % (1999), split between employer and employee, (or 3.2% to 3.5% respectively.)

*CPP: The year's Year's Maximum Basic Pensionable Earnings will increase from $36,900 in 1998 to $37,400 in 1999, thus making more income subject to CPP taxes.

EI: Employment Insurance taxes, applicable to all earnings under $39,000, will decrease from 2.7% to 2.55% (employee) and from 3.78% to 3.57%.