In 2013, paychecks for middle-class Canadian workers will be smaller because of hikes in Employment Insurance (EI) and Canada Pension Plan (CPP) rates. Employees and employers are expected to pay a big chunk throughout the year as the federal government debates the CPP with the provinces.
For Canadian workers earning at least $47,400 each year, they will have to pay an extra $51.50 to EI, while employers will dish out an additional $71.61. When it comes to CPP, contributions will jump $49.50 for individuals making $51,100 and employers will be doling out the same amount.
The increases come as CPP benefits will go up by 1.8 percent for present recipients. The maximum benefit for new recipients will now exceed $1,000 each month, which is an increase of $25.83. Old Age Security (OAS) benefits will also get a 0.2 percent boost. Someone who receives the maximum OAS pension will earn $546.07 per month.
CPP and EI rates aren’t the only things going up for Canadians this year. Tax rates are soaring all across the country for all income groups, whether it is related to public transportation, health care, education or even entertainment.
Wealthier Canadians working in Manitoba, Nova Scotia, Ontario and Prince Edward Island will be paying higher taxes. Residents living in Quebec will be maintaining a slate of elevated tax rates, including an increase in liquor and tobacco taxes, an additional income tax bracket and higher health taxes for high-income workers. British Columbia will be slapped with higher payroll health taxes for the fourth straight year.
“Every Canadian will be paying more in 2013 thanks to rising CPP and EI premiums. EI and CPP contributions are taxes, pure and simple. Wage earners have no choice whether to pay them or not,” said Gregory Thomas, Canadian Taxpayers Federation federal Director, in a press release. “Each and every one of these tax grabs cuts Canadians’ purchasing power. Politicians who talk about boosting CPP benefits never talk about the $4,712.40 they’re already taking from workers to pay for the pensions we have now.”
A slate of service fees is also getting an increase. It was announced last month that passport costs are rising. Adults will pay an additional $33 for a passport in July ($120), while children will be charged another $33 for a passport ($57).
“The current fee structure hinders Passport Canada’s ability to cover costs and expenditures while maintaining existing security and service standards,” Passport Canada said in a statement posted on Canada Gazette. “It also makes implementing enhancements such as the electronic passport (ePassport), one of the Government of Canada’s commitments, financially impossible.”
Postage stamps will be going up. The price to mail a standard letter within Canada will rise by two cents to $0.63 as of Jan. 14. If Canadians want to mail that same letter to the United States then it will be another five cents to $1.10.
Taxes and government fees are not the only aspects of daily life going up.
It was reported last month that food prices are expected to rise throughout 2013. Projections by a University of Guelph paper suggested an increase between 1.5 percent and 3.5 percent at the grocery store this year, which is up from 2012’s one percent.
Perhaps the only 2013 increase that will benefit Canadians is the Tax-Free Savings Account (TFSA) contribution limit. The Department of Finance announced that the maximum amount will go up by $500 from $5,000 per year to $5,500. Eventually, when the federal budget is balanced, it will double to $10,000.
However, with near-zero percent interest rates since 2008, savers are not earning much on their savings or basic investments. For $1,000 in a general savings account (non-TFSA) at one of the major financial institutions, such as TD Canada Trust or the Royal Bank of Canada, interest garnered would be roughly a nickel a month.
With low interest rates come higher debt loads. With higher taxes comes less income for families. The Frasier Institute published a study last summer that found the average household spends more on taxes than on basic necessities, such as clothing and food. In 2011, the average Canadian family income was $74,233, but paid $30,792 (41.5 percent) in taxes to all three levels of government.