"Enhancing" CPP is just a tax increase on entrepreneurs

A payroll tax increase during a tentative economic recovery?

I know that “enhancing the Canada Pension Plan” sounds like a worthy initiative at first blush. But isn’t it just a tax increase on business? Seems like it to me. If job creation is the key to a continued recovery, CPP already costs the average small business employer 1.6% of its payroll. Bumping that figure higher is only going to make the decision of adding extra staff all the more difficult for the average entrepreneur.

I think Finance Minister Jim Flaherty’s initial instinct on this was correct. The time isn’t right. It may never be, in fact. If Canadians aren’t saving enough for retirement with RRSPs and TFSAs, why should employers be asked to make up part of the difference? It won’t dramatically change the end result for most people. And the potential short term hit seems ominous.

I might be with the Canadian Federation of Independent Business on this one. And let’s not forget, the CPPIB’s recent track record doesn’t build confidence in any event (see prior post “Solvency canary alert?: 59% of CPPIB PE $ commitments producing IRRs below 6%” Dec. 6-12). In fact, over the past four years, our $160B CPPIB has been unable to keep up with its own benchmark reference portfolio.

According to this year’s annual report (pg. 80), the CPPIB team produced $1.7 billion of negative cumulative value add over the past four year period. I doubt any Provincial Finance Ministers even know of their recent subpar performance.

If they did, they’d have another good reason to wait before considering a tax increase on entrepreneurs.

MRM
(disclosure – this post, like all blogs, is an Opinion Piece. And, of course, reflects a personal view and is not meant to represent the views of the TPA, its Board/Staff or the federal government.)