I have stated it before and I’ll state it again. I love being an entrepreneur. I love owning and running my own business and it’s a life I choose and wouldn’t trade. However, there are good days and some more challenging days in the entrepreneurial life, and this is one of the later.
With our newly elected majority Liberal government in place in Ontario with a strong mandate for the next four years, it becomes clear that they will be able to implement the main plank of their platform – the Ontario Retirement Pension Plan (ORPP). https://www.ontario.ca/government/ontario-retirement-pension-plan
I could debate for hours whether or not the government should be involved in providing for those of us not smart enough to save for our own retirement, and the obvious sarcasm of this sentence would probably tell you what I think. But I have a good friend who works or the CPPIB and he would have me believe that they are a pretty efficient investor of our money in the aggregate, so if an organization is going to do it more efficiently, then perhaps this type of forced savings isn’t the worst affront to my libertarian inclinations.
But the part that gets missed in most discussions about these plans is the extra payroll tax that it places on employers. Right now the CPP takes 4.95% off of each employees paycheque and as a business we match that amount. On top of that we pay 2.6% of their salary to the government for Employment Insurance. And if we’re successful enough to have payroll over $500k in a year (which we are), then we get to pay another 1.95% in Employer Health Tax. So in total we pay an extra 9.5% on top of our total payroll dollars in payroll taxes.
Now the Ontario government plans to introduce their new plan with planned (I say “planned” very hopefully) employee deduction rate of 1.8% with an equal company match. So that will put our combined payroll taxes at 11.3% of payroll.
I have not heard much discussion from politicians of any stripe as to disincentive to hiring that these taxes continue to provide. In a province with an unemployment problem, I don’t believe that we need any extra reasons for businesses to avoid hiring people, especially young people.
After paying all these payroll taxes, if we are successful in growing our business, hiring more people and then making more money, we’ll get to pay an extra point of income tax as a reward.
It’s always a good day to be an entrepreneur – just some are better than today.