Conservative Leader Pierre Poilievre during Question Period on Parliament Hill in Ottawa, Tuesday.Adrian Wyld/The Canadian Press
Politicians are often criticized for pushing “boutique tax credits” for niche groups that end up distorting the tax code. But Opposition Leader Pierre Poilievre is taking that bad idea to new heights with his pitch for tailored relief for laid-off auto workers – a bespoke tax measure.
On the surface, Mr. Poilievre’s proposal to reduce the amount of withholding tax taken from the severance payments of 1,200 laid-off workers from GM’s CAMI plant in Ingersoll, Ont., sounds like a welcome measure to help them during a hard time, when many are worried about their financial futures. However, the idea of giving them special tax treatment is problematic, as it would give a perk to some workers and not others.
On Monday, Mr. Poilievre released a letter to Finance Minister François-Philippe Champagne asking him to reduce the withholding tax taken from GM workers’ severance payments. “The least your government can do is stop taking their money at the worst possible moment,” he said. Mr. Champagne’s office was right to quickly reject the request.
The letter described laid-off workers who are struggling because they need to pay mortgages and buy groceries, yet the tax man has already taken a big chunk of their lump-sum payouts. Generally, lump-sum severance is subject to a withholding tax between 5 per cent and 30 per cent to cover what will need to be paid to the Canada Revenue Agency. If the amount taken is later deemed to be too high based on the person’s annual income, it will be refunded at tax time.
The former GM workers are in a tough place, but they are in the same position as other employees receiving pink slips, and most are likely eligible for Employment Insurance without waiting, owing to recent rule changes. There is no reason they deserve different treatment than other laid off workers, many of whom will receive smaller severance packages, if they get them at all. Having a finance minister intervene for employees in a specific company or sector would open the door for lobbyists trying to get deals for specific groups, and could lead to an escalation of politically driven preferential treatment.
Reducing the amount of tax withheld could also come back to bite the laid off GM workers. While some former employees would no doubt prefer to have more cash in hand, they might struggle to pay money they owe the CRA at tax time.
Some of the details in the Conservatives’ pitch are perplexing. Arpan Khanna, the MP for Oxford where the CAMI plant is located, said his office has seen paystubs of workers who received $60,000 in severance, but after the withholding tax, just $24,000 was left. This 60 per cent withholding rate is not normal, says Jason Heath, managing director at Objective Tax & Accounting. The Conservatives should explain the specifics of these workers’ situation.
Finance Ministry rejects Conservative request for tax relief for laid-off GM workers
Following Mr. Poilievre’s announcement, Ontario NDP Leader Marit Stiles jumped on the bandwagon, saying Premier Doug Ford should press Prime Minister Mark Carney to stop taxing the severance pay of workers impacted by tariff-related job losses. Creating a special tax rule for workers laid off for a specific reason is even more unworkable idea than Mr. Poilievre’s. The Ontario NDP confirmed they aren’t just calling for just an elimination of the withholding tax, but want to eliminate the taxation of severance payments to these workers entirely. This even more problematic, as it would advantage these workers over others earning the same income.
If there is indeed an overall problem specific to withholding taxes on severance – something that Mr. Poilievre and Ms. Stiles didn’t elaborate on – they should call for broader changes to the tax rules. This would be fairer and easier for the CRA to administer.
All too often, politicians pick favourites by doling out favours or subsidies to specific companies, or in the case of Prime Minister Mark Carney, selecting winners through its Major Projects Office. This allows them to make announcements and woo specific voting groups, but it’s not a great way to create a fair and prosperous economy. Instead, they should focus on rules and policies that make sense for workers and companies in general.
As Opposition parties, the federal Conservatives and Ontario NDP should bring practical solutions to the table, not emotionally driven rhetoric to score cheap points with workers. Fiddling with the tax rules for one group of workers and not the others can only cause harm when the bill comes due.