The Ontario Tories have more than doubled the exemption from the Employer Health Tax (EHT) announced in the Ontario budget (and included in the budget bill), increasing it from $490,000 in payroll to $1 million. Currently, employers with payrolls over $400,000 have to pay 1.95 percent of that, so the additional savings for a business with $1 million – $5 million in payroll would be $9,945.
This change would make permanent a temporary change that was introduced earlier this year “due to COVID.”
The government is also increasing the level of payroll before employers have to make monthly EHT payments. Previously, employers with an annual Ontario payroll over $600,000 had to make monthly EHT instalment payments. With this legislation, that will change to $1.2 million after the end of this calendar year. Another perk.
In the budget, the Tories cost this increased exemption at $360 million annually, and now claim that 90 percent of businesses will be completely exempt from the EHT. They also say 57,000 businesses will benefit from this raised exemption:
“Ending a tax on jobs for an additional 30,000 employers by proposing to make permanent the Employer Health Tax (EHT) exemption increase from $490,000 to $1 million. With this additional relief about 90 percent of employers would pay no EHT, saving them $360 million in 2021–22 that could be reinvested in jobs and growth.
“Starting in 2021, this proposed exemption increase would provide additional annual tax relief (estimated at $360 million in 2021–22). About 57,000 employers would benefit in 2021, of whom 30,000 would no longer pay any EHT. This measure would mean that eligible private-sector employers would save up to a total of $19,500 annually in EHT going forward. However, Ontario’s largest employers (with over $5 million in payroll) will continue to pay EHT.
“In 2021–22, this proposed exemption increase is estimated to provide $360 million in additional tax relief. In 2021, about 57,000 employers would benefit, including about 30,000 employers who would no longer pay any EHT in the year. This is in addition to about 425,000 smaller payroll employers who would already be exempt with a $490,000 exemption. The EHT would be reduced by about $6,200, on average, in 2021 among those benefiting from the exemption increase.”
Regarding the $19,500 savings claim in the above quotations: the governments seems to be assuming 1.95 percent on the total $1 million exemption rather than just the increase from $490,000 to $1 million. That would equal $19,500 savings – but almost half of that was already in place under the previous exemption.
They are costing this year’s (2020-21) implementation of the change at a $90 million loss for revenue. That is presumably for the first quarter of 2021, which was not captured by the temporary increase in the exemption announced earlier. Four quarters of $90 million would equal the $360 million they say this change will save employers annually in 2021-22.
It gets even better in 2022-23, with the expected savings for business going up to $380 million.
Counting the media tax credit, the reduction in property taxes for employers and the property tax relief for small business, the Ford government is hoping to cut taxes for business by $300 million in what remains of this fiscal year, $875 million next fiscal year and $975 million in 2022-23. For business, it’s as if we had no deficit or debt issues at all.
On top of all this, the government is also cutting electricity costs for business, “saving medium-size and larger industrial and commercial employers about 14 and 16 percent respectively, on average, on their electricity bills.” That’s an expense of $1.3 billion over three years – an additional annual $433 million giveaway to medium and large businesses.
This tips the government’s hand about how they will deal with the fat structural deficit that will remain after COVID. They will oppose tax and revenue increases on the wealthy and corporations and in fact are more likely to cut their taxes and other costs further. The burden will be put on the shoulders of working people.
The government’s Bill 124 restrictions on free collective bargaining in the broader provincial public sector should save them about $750 million in the first year of application to all BPS agreements. In other words, Ford’s public sector wage restraint will – almost – pay for the business tax cuts announced in the budget. Grrr…..
Doug Allan writes the “Defend Public Healthcare” blog at ochuleftwords.blogspot.com
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