Payroll tax cut chopped

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This article was published 14/03/2024 (656 days ago), so information in it may no longer be current.

While the NDP has kept a number of tax breaks promised by the Tories in last year’s budget, it has decided to ditch a payroll-tax reduction that hinged on the province having better-than-expected revenue.

A spokesman for Finance Minister Adrien Sala said Thursday Manitoba’s fiscal situation doesn’t support a payroll tax cut.

The second-quarter fiscal update showed revenue was lower than forecast and the deficit had crashed to $1.6 billion.

The payroll tax cut would’ve been the first reduction in 25 years, benefited the 2,750 businesses that pay it and saved them $35 million, beginning in 2024, last year’s budget said.

It would’ve lowered the payroll tax to four per cent from 4.3 per cent on payroll between $2.25 million and $4.5 million; and to two per cent from 2.15 per cent on total payroll, if payroll exceeds $4.5 million.

The Progressive Conservatives’ last budget said the reductions were to be confirmed before Jan. 1, 2024, and depended on the province’s fiscal performance. There needed to be sufficient resources and a strong enough fiscal foundation to support the reduction.

On Thursday, the Canadian Federation of Independent Business wasn’t surprised the payroll tax cut was chopped.

It said it was just “pleased” to see the NDP government had carried out the PCs’ 2023 budget promise to increase the payroll tax exemption to $2.25 million and the reduced rate threshold increased to $4.5-million.

The federation has advocated for the threshold increase, said spokeswoman Brianna Solberg.

“We are glad the NDP has kept that change.”

Still, Manitoba businesses would have greatly appreciated the lowering of payroll tax rates, Solberg said.

“With all the rising costs business owners are facing, increased taxes are their top concern, and payroll taxes have been identified as the most harmful type of tax,” she said.

“Businesses must pay these taxes regardless of their profits and, right now, over half of Manitoba small businesses are still making below-normal revenues (and/or) profits compared to pre-pandemic levels,” Solberg said.

“Payroll taxes drive up business costs, forcing businesses to make tough decisions such as raising their prices at a time when consumers are already feeling the pinch, or forgoing hiring plans or employee raises,” she said.

The PCs had been chipping away at the payroll tax while in government.

Since 2020, they increased the level at which employers are exempt (to $2 million from $1.25 million in 2023) and the level at which employers pay the tax at a reduced rate (to $4 million from $2.5 million in 2023).

PC finance critic Obby Khan urged the government to continue following in his party’s fiscal footsteps.

“The NDP need to follow our lead and eliminate the payroll tax so it’s more affordable to do business in Manitoba, and eliminate the carbon tax to lower the cost of living for all Manitobans,” Khan wrote in an email Thursday.

carol.sanders@freepress.mb.ca