Call a spade a spade—CPP payroll tax is a tax
Our recent study found that virtually all Canadian families with children will soon pay higher taxes due to federal income tax changes already in place and forthcoming increases to the Canada Pension Plan (CPP) payroll tax.
If the increased CPP taxes were fully in effect today, 92.2 per cent of Canadian families would pay higher federal taxes. And they would pay $2,218 more per year, on average. (The increased CPP taxes alone translate into $1,624 higher taxes.)
These results prompted a debate on social media and in the comment sections of various news outlets about whether mandatory contributions to the CPP can be considered a tax. Some argue it’s a forced contribution to a pension fund while others call it a “regulatory charge.” The reality, however, is that compulsory contributions to the CPP, which all workers must make by law, are absolutely a tax on workers.
A “tax” is a compulsory contribution for the support of government facilities, programs, services or other spending levied on persons, property, income, commodities and transactions. CPP contributions clearly fit this definition as they are mandatory payments levied on eligible employment income to support a government program—the CPP.