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Column: Yes, payroll taxes are taxes. No, Trudeau shouldn't be raising them

Should Canada Pension Plan and Employment Insurance payments be considered taxes?
getty - tax return
Tax return forms.

The following column was submitted to the Tri-City News from Franco Terrazzano, Federal Director of the Canadian Taxpayers Federation (CTF).

Political pundits are twisting themselves into pretzels arguing mandatory Canada Pension Plan and Employment Insurance payments are not a tax.

There’s no debate that the government is taking more money from workers through higher CPP and EI payments.

But should CPP and EI payments be considered taxes?


If something looks like a duck, waddles like a duck, and quacks like a duck, then it’s a duck. Likewise, if it takes money from you like a tax, funds government spending like a tax, and even the government admits it’s a tax, then it’s a tax. 

Payroll taxes also don’t directly pay for your service. You pay $160 at a government passport office for the service of renewing your passport. That’s a fee. But that’s not what happens with CPP payments. 

“There’s an assumption that the money one pays into the CPP is going to fund their own personal retirement,” explain Charles Lammam and Hugh MacIntyre of the Fraser Institute. “[But] most of the contributions you make today fund someone else’s retirement.”

The money that comes off your pay cheque largely funds today’s retirees.

When you retire, you won’t be spending your money. Your cheques will be coming from future generations. And you’ll be counting on future politicians to keep the fund healthy and delivering those cheques.

But there is no legal requirement for a future government to provide pension benefits. And if you pass away early, your CPP benefits aren’t fully transferred to your family.

That means you don’t truly own the money you’re forced to pay into the CPP. 

Let’s review. The government forces you to pay for CPP and EI. The government then redistributes much of that money to other people. That’s the definition of a tax.

Even the federal government admits CPP and EI payments are taxes. 

If you type “what taxes you pay” into Google, the first result is a government website that lists the various taxes Canadians pay. Just below income taxes, sales taxes, property taxes and tariffs are CPP and EI payroll taxes. The Tax Court of Canada deals with appeals to EI or CPP decisions. As a member of Parliament, Justin Trudeau described rising EI payments as “a direct payroll tax increase.”