Idea alert

Scott Clark and Peter DeVries take on EI premiums.

Simply put, the EI premium rate is a bad tax – probably the worst tax that the government has available to raise revenues. It inhibits employment and economic growth; it is unfair in its impact on low-income workers; it is extremely complex to calculate and administer…

The best option would be to get rid of the EI premium rate altogether and replace it with an alternative source of revenue. One way this could be done is by replacing the lost revenues, about $20 billion, by increasing the GST and corporate income tax rates.  This would address the problem of the working poor by spreading the burden over much larger tax bases.  In addition, the GST low-income tax credit could be increased, sheltering these individuals altogether.




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Idea alert

  1. “One way this could be done is by replacing the lost revenues, about $20 billion, by increasing the GST and corporate income tax rates”

    …or elect a competetent govt in the first place.

  2. Oh please. This is the stupidest idea I’ve ever heard. I mean come on! What does it do for the (Conservative/Liberal/New Democrat) Party? What’s in it for US????

  3. “Simply put, the EI premium rate is a bad tax – probably the worst tax that the government has available to raise revenues …. One way this could be done is by replacing the lost revenues, about $20 billion, by increasing the GST and corporate income tax rates.”

    Doug Saunders ~ Abolish Corporate Tax:

    “In fact, the strongest arguments against corporate tax come from the left …. Corporate tax, he noted, is fundamentally regressive: It shifts wealth to the rich. And not just because General Electric avoids it and corner shops don’t. Since corporations do not physically exist, corporate tax is ultimately paid by individuals – and, as many studies have shown, those individuals tend to be the company’s workers more often than its shareholders or executives.” 

    Stephen Harper ~ I don’t believe that any taxes are good taxes

    • http://dougsaunders.net/2011/04/corporate-tax-abolish-ignatieff-harper-david-cameron/

      Why don’t you provide links? As far as i can grasp your point seems to be that all taxes are bad. If that is the case you are simply not representing anything near what Saunders had to say on the subject; his point being that since corps largely avoid taxes anyway the tax is regressive. He argues for more of a reliance on the personal income tax regime which is considerably more progressive – this is a long way from arguing that all taxes are bad as our mathmatically challenged PM does. 

  4. Although they certainly meet the general definition of being a “tax”, EI premiums are technically just that – insurance premiums the quantum of which is based on actuarial calculations as to how much money is needed to pay out benefits to unemployed workers.  The fact the premiums have risen to their current level isn’t because the actuaries have been wrong – it’s because the EI program has become increasingly generous – higher benefit payouts to greater categories of workers who have to work fewer weeks to qualify.

    DeVries and Clark are advocating changes to EI that essentially extinguish any vestiges that it is “unemployment insurance” – and that converts it into just another form of welfare.  Perhaps such a change is inevitable, but it should still not be undertaken without a comprehensive review of how such a change will effect policy objectives of promoting job growth in various regions.

    • In what way have the programme become more generous?[ other than maternity leave or parental benefits ie., non employment related issues]. In my experience the thresholds have gotten much tougher to cross – maximum of 900 hrs needed to qualify if you haven’t been on UI for several years; someone explain that one for me. You’ve done your best to not use the programme but you’re forced to jump over a higher hurdle then someone who may have a rolling claim, someone who may well be in a well paid union but has more or less instant access when a short term project may have ended. Yes that individual pays high premiums, but it seems to me [ out west at least] that UI has become less of a back stop for someone who losses their job and become a subsidy programme for successful businesses.
      There have been other measures that have markedly changed the nature of the programme ie., disqualification or limitations on your eligibility if you quit or worse are dismissed. My main beef[ some reform is always neccessary] is that the original intent of UI to being a cushion of sorts to a broad spectrum of working people has deteriorated into a top up programme for those who are not at all the most vulnerable on the justification that they pay the highest premimums.[ although there is a claw back provision for the high end guys] Part time workers for instance are now covered but the hours needed to qualify make accessing benefits a joke. We need to ask for whose benefit is the system really working? For those who really need the help or for the benefit of employers?

    • The system has become more stringent for actual unemployment and the benefit levels have been reduced by several percentage points even with a fairly low maximum ceiling, while social benefits such as maternity and paternity support have increased.

      The problem is that EI is an insurance system that has become overlaid with social support programs and regional economic development objectives and it displays the worst tendencies of both with excessive attempts to limit liability through bureaucratic delay and discouragement on the one hand, and inefficient processing of social benefits that would be better administered through the income tax system on the other.

      In the hands of anti-tax governments from Chretien-Martin through to Harper it became a revenue bonanza for deficit/debt fighting with the result that the government was forced to look at raising premiums when the last recession hit.

      If it’s an insurance program then premiums are reasonable, but if it’s going to be a social support and regional economic development program, and signs are that’s what it has become, then it should be funded through corporate and personal income tax.

      Unfortunately politicians who have the guts to do the right thing with regard to raising or introducing or reforming appropriate taxes are in short supply.

      By the way, anyone who thinks EI is a significant disincentive to employment hasn’t ever had to sing the Yes, No, No Yes song.

      • GWF, kcm2 and toby all raise good points.  I just wish our govt would decide if it actually wants EI to be a real insurance program, or, as you note, some glorified welfare scheme.  But of course our politicians are too gutless and craven to address the issue.

        I remember the one time in my life I was actually eligible for EI, many years ago.  I applied, and they gave me the bureaucratic equivalent of the anal probe + full body cavity search before I was finally issued the (rather measly) benefits cheque.

        I came away concluding what many others have concluded:  the program seems mainly designed for, and to benefit, “repeat users” and “chronic users”, most notably the seasonal workers in chronic high unemployment regions such as Atlantic Canada (which is partly why it has morphed into a glorified permanent welfare program for those people).

    • EI premium rates decreased for several years prior to the recession & I don’t believe they have increased since the recession started.  The only thing that happened is that scheduled rate decreases were put on hold.  As to “increasingly generous – higher benefit payouts” the benefit rate for EI is slightly over $400.00/wk payable for at best, a year in areas with high unemployment rates & fewer weeks in areas with lower unemployment rates.  And that benefit rate has remained the same for 10+ years.  As to qualifying for benefits – the majority of people have to have accumulated 950 hours (approx 5 months of full time work) during the previous 12 months in order to qualify for benefits at all. 
      You are seriously out of touch on this issue.

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