Mandatory CPP tax hike unpopular, poll shows

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BY LAURA JONES

 

A mandatory increase to the Canada Pension Plan payroll tax is on the agenda for Canada’s finance ministers again as they meet this weekend.

The consensus view emerging from previous meetings – that an increase to CPP is desirable and not a question of “if” but just when and how – is out of touch with the consensus view of Canadians according to public opinion results released [Thursday].

The most interesting result from the poll is that Canadians rank a mandatory CPP increase close to the bottom of the list of possible ways that government can help Canadians save for retirement. Other options such a allowing a voluntary increase in CPP, providing an incentive such as a onetime match for a retirement savings contribution, and having government control its own spending to allow for tax relief come out far higher.

Controlling government spending to provide more tax relief is the top preference for both the general public and small business. I guess people think it’s a bit rich that finance ministers are ignoring overspending problems while suggesting that Canadians be mandated to save more. One example of how much government overspending costs: if all public sector employees were paid at private sector norms, every family would have an additional $3,100 a year to put toward retirement.

The poll shows that a mandatory increase in CPP premiums is a bad idea as it would have some very negative unintended consequences. Small businesses would look at freezing or cutting wages (76 per cent) and reducing investments in their businesses (59 per cent) to pay the increase.

Many of the general public say they would be forced to cut back on basic necessities such as food and rent (45 per cent) and shift savings from other retirement vehicles (42 per cent).

Over the past month I have had the opportunity to meet with several finance ministers. I have been struck by the strong sense they have that there has been enough discussion about whether increasing mandatory CPP premiums (and ultimately some time down the road benefits) is a good idea. While there has been a lot of talk among finance ministers, there has been no meaningful consultation with those who would be affected.

We haven’t even heard as much through the media as we normally would on such a radical policy change. We can thank Rob Ford and Mike Duffy for that.

Meaningful consultation would include discussing the question of “if” a mandatory increase in CPP premiums is a good idea at all and explore other options. Instead, we are hearing that finance ministers would be happier to just discuss the when and how. The “if” question they have settled among themselves. This is a recipe for some very bad policy and, by the looks of the polling, some bad politics too.

 

Laura Jones is Executive Vice President of the Canadian Federation of Independent Business. She can be reached at laura.jones@cfib.ca. Follow her on Twitter @CFIBideas.