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Keep It Simple S…ubsidy

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9 minute read

You want my idea for the wage subsidy… well here it is.

WARNING: It is so simple to implement, there is no way a government would do it.

(Originally posted on LinkedIn (no joke) April 1, 2020)

 

 

People have said “you are quick to pick apart the wage subsidy, so what is your solution?”

So… you asked for it… here it is:

I’ve said it from the very beginning that it should resemble EI support. All they should be doing is simple.

(No this is not an April Fool’s joke… but I am hoping the Press Conference on April 1, 2020 by the Minister of Finance was)

I was fine with EI amounts… but since we have the Canadian Emergency Response Benefit (CERB)… let’s use that amount to keep it more simple.

The amount is this:

(just like the CERB). $2,000 per worker per month, taxable, and no withholdings up front

Put a ‘clawback’ amount on those that are getting it like the clawback on Old Age Security or regular EI benefits for when they file income tax next year.

The 3-prong approach to the subsidy

 

Prong 1 – CERB from Service Canada

Everyone should get it. Yes, everyone.

However, anyone that makes more than the EI maximum in 2020 must pay back 30 cents of the CERB on every dollar over the $54,200 EI maximum threshold when they file their 2020 taxes.

So when you file your personal 2020 income tax, if you ended up making more than $80,667 in income, you will have had to pay back the full $8,000 of CERB received on a T4E.

This results in helping everyone today, help jump start the economy when we need to and have those that get back on their feet quicker, paying some or all of it back.

If you received both the CERB from Service Canada, and the CERB through your employer, you have to pay back the amount greater than the $8,000 received, and then any other amount based on the formula above.

This will prevent or reduce the double dip.

 

Prong 2 – CERB through the Small Business employer

The small business (less than $15M in assets of all associated corporations) employer would also get the CERB on a per-employee basis. They already have to fill out the number of employees when they file their remittance forms, so what’s the difference?

This $2,000 flows through to subsidize the wages, and must be paid to the employees. You create a different box number to track it on the T4 slips next year for audit purposes and to make sure the employee got the money.

I know this isn’t 75%, but the 75% was a capped amount anyways. That’s why I said keep it simple.

In order to incentivize the small business employer so they don’t lay them off, treat it as a flow through, and non-taxable to the employer.

So if there are five employees at the small business, the employer will get $10,000 of CERB to flow through to the employees.

The employee’s wages will be subsidized by the $2,000 amount, and they will put the $2,000 in a different box on each T4 slip for tracking purposes.

In order to incentivize the employer to act as the flow-through for Service Canada, this $2,000 will not be subject to EI or CPP by the employer and will not be included in the taxable income of the employer.

This allows the employer to claim the full wage deduction, have subsidized payroll costs, and save the income tax amount by deducting the full payroll.

By not counting it as income, this tax and remittance savings can be viewed liked an “admin fee” for acting on Service Canada’s behalf.

On $10,000 (5 employees) this would save up to $252 in Employer EI, $525 in Employer CPP, and $900 in federal income tax.

Cost to government for employer being the administrator instead of Service Canada: $1,167.

Incentive for employer to NOT lay off the staff, $10,000 in wage costs… and $1,167 in tax savings.

 

Prong 3 – CERB through Large Corporations

If the employer is getting the CERB on a per-employee basis and they are a large (greater than $15M in assets) corporation or associated group, allow them to not pay employer EI or CPP on the CERB.

100 employees = $200,000 = up to $5,040 in reduced EI, and $10,500 in reduced CPP remittances as the incentive.

So the employer gets $2,000 per employee as a subsidy to cover wage costs, and does not have to do payroll withholdings on the amount, saving them a total of $200,000 + 5,040 + 10,500 = $215,540.

Or put another way, they can save $15,540 by not laying them off.

If that’s not enough incentive, then perhaps look at it being only 50% taxable, which in the example above, would reduce Federal income tax by $15,000 (using 15% general rate x 50% x $200,000)

 

 

Audit Tracing

By simplifying the process, there is less ability for abuse.

Service Canada will issue everyone a T4E with the CERB they personally received from them (no application necessary).

T4 box numbers can be reconciled by CRA on slip filing to amounts of CERB received by the employer through the PIER system.

Those same boxes can be reconciled to specific individuals on tax filings to see if there were any that should repay.

Amounts greater than $8,000 received by anyone will need to be repaid.

Those with income over the EI Maximum amount, will have to repay some or all of the CERB back when they file.

If you don’t agree… well… the specific repayment formula can be figured out later… we have a year for that. We need the money in the public’s hands now though.

 

In Conclusion

These incentives and recapture mechanisms will reduce the likelihood of layoffs in low-margin industries like hospitality since $2,000 a month goes a long way to covering those wages; it will “Flatten the EI Curve” (trademark pending – not really… but I like saying it)

It would get everyone back working quicker after this is done by maintaining the connection to employers, and get the economy kick-started with cash injections at the front of this thing, rather than the end.

In the end… you have employers flowing the $2,000 through to the employee on Service Canada’s behalf as a no-withholding amount and a nominal cost to the employer to administer it, rather than Service Canada processing hundreds of thousands (if not millions) of individual applications.

If they are a small business, they actually get a tax savings by being the administrator and helping Service Canada in the process.

If they are a large business, they can have a good chunk of payroll costs reduced by not having to pay EI and CPP on the amount, and perhaps tax savings.

In the end, every worker gets $8,000 over 4 months just to buy everyone time and we have Flattened the EI Curve.™

Biography of Cory G. Litzenberger, CPA, CMA, CFP, C.Mgr can be found here.

#RedDeerStrong – If you’re struggling and you need to consolidate debt through a mortgage refinance, Kristen is here for you.

CEO | Director, Canadian Tax Advisory CGL Strategic Business & Tax Advisors With the Income Tax Act always by his side on his smart-phone, Cory has taken tax-nerd to a whole other level. His background in strategic planning, tax-efficient corporate reorganizations, business management, and financial planning bring a well-rounded approach to assist private corporations and their owners increase their wealth through the strategies that work best for them. An entrepreneur himself, Cory started CGL with the idea that he wanted to help clients adapt to the ever-changing tax and economic environment and increase their wealth through optimizing the use of tax legislation coupled with strategic business planning and financial analysis. His relaxed blue-collar approach in a traditionally white-collar industry can raise a few eyebrows, but in his own words: “People don’t pay me for my looks. My modeling career ended at birth.” More info: https://www.CGLtax.ca/Litzenberger-Cory.html

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Alberta

Covid no longer means special measures. Province brings treatment in line with flu and other viruses

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Adapting COVID-19 measures to support Albertans

With strong vaccine uptake, Alberta will gradually bring COVID-19 measures in line with other respiratory viruses to ensure health system capacity for the fall.

Nearly 75.6 per cent of eligible Albertans have now received at least one dose of COVID-19 vaccine, and 64.3 per cent are fully immunized. Vaccines dramatically reduce the risk of severe outcomes and the risk of infection. While COVID-19 cases may rise in the coming months, a surge of hospitalizations and other severe outcomes is much less likely thanks to vaccines.

In the coming weeks, Alberta’s health system will take steps to make sure that it is ready to support all patients, including those with COVID-19 and other respiratory viruses, like influenza, which health officials expect to increase this year.

As a part of this, Alberta will bring COVID-19 quarantine, isolation, and other measures in line with those used for influenza and other viruses.

Testing for severe cases, provincial monitoring, outbreak management in high-risk settings, and other key measures will remain in place. Health officials will be able to adapt as needed if hospitalizations due to COVID-19 spike in the future.

“Our health system will keep protecting Albertans who are exposed to COVID-19 while also ensuring that we are able to handle all other viruses and illnesses. As the majority of us are vaccinated against COVID-19, we are adapting to make sure that the health system is ready to care for all Albertans, whatever their illness. Please get vaccinated to help protect your health and the health of those around you.”

Tyler Shandro, Minister of Health

“Our top priority is supporting the health of Albertans. COVID-19 is still with us but we are now in a place where we need to manage it through vaccinations and the proven public health measures used for other communicable viruses. We expect to see increased influenza and other viruses this year, and these changes will make sure the health system is ready and able to support all Albertans in the months ahead.”

Dr. Deena Hinshaw, chief medical officer of health

A two-phase transition will be used to safely monitor the impact of the initial changes, adapt as needed over the next few weeks, and give more time to vaccinate Albertans.

The following changes will be effective July 29:

  • Quarantine for close contacts will shift from mandatory to recommended. Isolation for anyone with COVID-19 symptoms and for confirmed positive cases is still required.
    • Unimmunized individuals who know they have been exposed to COVID-19 should monitor for symptoms and seek testing if they become symptomatic.
    • Anyone who is not fully immunized should avoid high-risk locations such as continuing care facilities and crowded indoor spaces if they have been in contact with a case in the past 14 days.
  • All positive cases will continue to be notified. Contact tracers will no longer notify close contacts of exposure. Individuals are asked to inform their close contacts when informed of their positive result.
  • Contact tracers will continue to investigate cases that are in high-risk settings such as acute and continuing care facilities.
  • Outbreak management and identification will focus on high-risk locations, including continuing and acute care facilities and high-risk workplaces. Community outbreaks with a surge in cases leading to severe outcomes will also be addressed as needed.
  • Asymptomatic testing is no longer recommended. Testing will continue to be available for individuals who are symptomatic.
  • Mandatory masking remains in acute and continuing care facilities, publicly accessible transit, taxis and ride-share.

The following changes will take effect on Aug. 16:

  • Provincial mandatory masking orders will be lifted. Some masking in acute care or continuing care facilities may still be required.
  • Isolation following a positive COVID-19 test result will no longer be required, but strongly recommended.
    • Individuals with symptoms of any respiratory infection should still remain at home until symptoms have resolved.
    • Staying home when sick remains an important way to care for those around us by not passing on any infection.
  • Isolation hotels and quarantine support will no longer be available.
  • Testing will be available for Albertans with symptoms when it is needed to help direct patient care decisions.
    • This testing will be available through assessment centres until Aug. 31 and, after that, will be in primary care settings including physicians’ offices. For those with severe illness requiring urgent or emergency care, testing will be available in acute care and hospital settings.
    • COVID-19 testing will also be offered as needed in high-risk outbreaks such as in continuing care facilities.
  • Public health will focus on investigating severe cases that require hospitalization and any deaths due to COVID-19.
  • Outbreak management and preventative measures will continue focusing on outbreaks in high-risk settings, such as continuing and acute care facilities.
    • Community outbreaks will continue to be addressed as needed.
    • Daycares and schools will be supported with measures that would be effective for any respiratory virus if outbreaks are identified.

Health officials will continue to closely monitor hospitalizations and other severe outcomes due to COVID-19 in the province. Additional measures will be taken, as needed, in specific facilities or areas where an outbreak is occurring leading to severe outcomes.

Universal masking will not be required in schools once students return. However, it is recommended as a temporary outbreak intervention in response to respiratory outbreaks. A guidance document to support return to schools is being finalized and will be released in mid-August.

A wastewater baseline testing program will also be launched to provide area trend information and monitor variants of concern. More details will be released in the coming weeks.

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COVID-19

Nurses vs. MLAs: A Real Solution

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Nurses vs. MLAs: A Real Solution
Open Letter to Alberta MLAs
 
July 27, 2021
FOR IMMEDIATE RELEASE
Red Deer – Mountain View, AB
 
The Alberta government is calling for a 3% wage cut for nurses ($70,500 (average salary per ALIS) x 3% x 36,200 nurses = $76.56 million). Don Braid of the Calgary Herald is calling for Alberta MLAs to take a $22,000 wage cut (87 MLAs x $22,000 = $1.91 million). Unfortunately, neither of these options address the elephant in the room. Alberta will spend $23 billion on healthcare this fiscal year per Budget 2021.
 
Over the past year and a half, Albertans were forced to suspend their lives and lose their livelihoods under the guise of the common good and to protect our seemingly fragile healthcare system. If $23 billion dollars in annual spending does not secure our healthcare system against potential future threats, maybe it is time to stop accepting mediocrity and make some changes to the system.
 
Suggestions for your consideration:
 
  1. Immediately schedule a First Ministers conference (meeting between the premiers and the Prime Minister).
  2. Agree to repeal the Canada Health Act. According to the Canadian Constitution, healthcare is within the jurisdiction of the provinces.
  3. Funds needed to support provincial healthcare decisions would then be collected within each respective province instead of being received through the Canada Health Transfer.
  4. End the prohibition on private clinics and service providers which would generate competition, reduce wait times, decrease costs and ultimately provide better care for everyone.
 
Canadians have long triumphed our “free” healthcare system as being the best in the world. In reality, it is neither free nor the best. Embracing new ideas and private market solutions is the best way to improve our healthcare system for all Albertans. I for one, believe that Albertans deserve the best for their hard earned tax dollars. It’s time for a change, don’t you agree?
 
Sincerely,
 
Jared Pilon
Libertarian Party Candidate for Red Deer – Mountain View, AB
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