A payroll tax hike hits start-ups hard

As you well know, starting your own business doesn’t come cheap. Before you open the doors, launch or go live, you are already spending money on things like insurance and inventory, licensing, lease deposits and marketing. Once you get going, you add monthly rent costs, salaries, benefits and CPP and employment insurance premiums to the books. Those early years are tough – margins are often razor-thin – and a tax hike could be the difference between preliminary success and having to close up shop.

That tax hike might be closer than you think. In a couple of weeks, finance ministers from each province will head to Vancouver and decide whether or not to hike Canada Pension Plan (CPP) premiums, as many of them believe there’s a retirement savings crisis in this country, and the only way to solve it is to take money out of your businesses and off of your paycheques and hold onto it for you until you’re 65 years old. It’s important to get informed. Visit RetirementReality.ca , take the quiz, and find out how a CPP hike will impact you and other Canadians.

I appreciate that CPP is there as a safety net. But a safety net is supposed to catch you when you fall, not prop you up. It’s designed as an income supplement, not an income.

If you live in Ontario, you might be getting it twice as bad, since the Ontario government has moved forward with its reckless Ontario Retirement Pension Plan (ORPP). The ORPP will take another 1.9 per cent off your paycheque, and matched by businesses for every employee. If you’re making $50,000 per year, that’s an additional $883 off of your income, on top of a potential CPP hike.

If governments are really interested in helping young people save more – and make no mistake, these premium hikes are really going to hit young people disproportionately – then they should be arguing less about how much of our money to take and more about the best way to help people save. If there really is a “retirement savings crisis” on the horizon (and to be sure, there are significant questions as to whether or not there actually is) then surely it’s a crisis of education, not finance. Governments should be more focused on teaching young people about the importance of saving money and how to go about it, instead of taking all choice out of the equation and doing it for them.

I appreciate that CPP is there as a safety net. But a safety net is supposed to catch you when you fall, not prop you up. It’s designed as an income supplement, not an income.

What I want in a savings plan is flexibility. When I’m saving for my future – be that with an eye on retirement or towards something more imminent, such as paying off a business loan, buying my first home or car, planning a wedding or planning for kids – I want to know that I have access to the money that I worked for. Enhancing the CPP would take that option away from me.

That extra money governments are looking to take off your paycheque every month is the money that many of us put into RRSPs and TFSAs. Increasing my premiums won’t help me save more, it will help me save differently – in a way where I have no control or access to the funds in case of emergency and at a rate of return that barely outpaces inflation.

A CPP premium hike won’t just take your retirement future out of your hands, but your business’s future, as well. That extra money is money you could be reinvesting into your business, your employees and the Canadian economy. It’s difficult to innovate without the capital to do it.

Pension reform should be a choice. We should be allowed to say no to increased premiums, to keep and invest our hard-earned money on our own.

It’s part of the reason we went into business in the first place, to be masters of our own financial destiny. Handing over the keys of the store to government is entrepreneurial poison.

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RyanRyan Mallough holds a Bac. Soc. Sci. in political science from the University of Ottawa and an MA in journalism from Western University. He currently works as the media writer with the Canadian Federation of Independent Business.

2 thoughts on “A payroll tax hike hits start-ups hard

  1. Pingback: Why I oppose the proposed CPP expansion | My Startup

  2. Pingback: The Old Man and the CPP | My Startup

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