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Manitoba’s payroll tax: taxing away jobs since 1982

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By Janice Storozuk, Business Counsellor

Published in the Winnipeg Sun on August 28, 2019.

Manitoba’s small businesses are feeling taxed out. However, with September 10th fast approaching, candidates have ignored the urgent need to fix one tax in particular that is stifling growth across the province.

Why are we not talking about the Manitoba Payroll Tax?

In 1982, during a recession, the Pawley government created the Manitoba Health and Post-Secondary Education Tax Levy. Many know it as the Manitoba Payroll Tax. While the government deemed it the fairest option to lift the province out of the tough economic storm, there was no tax like it elsewhere in western Canada – and for good reason. 

Payroll taxes are the worst taxes for businesses. They punish growth, stifle job creation, and are profit insensitive. New research from the Canadian Federation of Independent Business (CFIB) outlines how payroll taxes are regressive for small businesses because they are so labour-intensive. 

This new research paints a bleak picture for businesses in Manitoba, who have the fourth highest payroll tax burden in Canada and pay over 10 per cent in taxes on their payroll depending on the size. Worse yet, the Manitoba Payroll Tax is arguably the most punishing provincial payroll tax in the country; slamming businesses whose payroll exceeds $1.25 million with a 4.3 per cent tax on every new hire or wage increase. This exemption isn’t indexed to inflation and hasn’t increased since 2008. 

This isn’t a tax only on large employers. How about an HVAC or plumbing company? We rely on them to quickly repair a furnace in the winter, or to get the A/C running during a summer heat wave. You wouldn’t want to be without those services, right? For one of these small trades companies, employees commonly earn $75,000 or more. A business with just 17 employees then would be hit with a $3,225 Manitoba Payroll Tax bill to add another employee. That’s just the one tax; it doesn’t even begin to count additional costs from Employment Insurance, Canada Pension Plan (which is increasing for 7 straight years), Workers Compensation Board premiums or employee benefits. 

In the 2019 budget, the province was projected to take in $381 million from businesses through the Manitoba Payroll Tax. That is more than they will collect in fuel taxes or, ironically, tuition fees. And, despite the title, this money goes into general revenues, without providing businesses any added benefits or services. 

As a small business advisor for over 20 years, I respect our bold and passionate entrepreneurs. They seize opportunities to offer their expertise and invest their whole lives in the business. It’s all done at their own personal risk, so when the business succeeds, they should be rewarded. Instead, businesses are punished for trying to grow and create jobs for Manitobans.

It’s discouraging to witness small businesses when they are hit by the Payroll Tax. I often hear how the entrepreneurs are blindsided by this requirement through a tax audit. Their hard work to serve the community and employ Manitobans is ‘rewarded’ when their company payroll passes the $1.25 million mark. 

How many more jobs might smaller employers create – or what type of wage increases may be given to existing staff – if those funds were not siphoned off by payroll taxes?

In 1982, newspaper headlines stated “Pawley’s payroll tax is no laughing matter,” and said the Payroll Tax was “Taxing away jobs.” These headlines are as relevant today as they were then. So, when you meet with your local candidates during the current provincial election, ask for their plan to fix the Manitoba Payroll Tax. 

Let’s elect a government who will boldly end 37 years of taxing away jobs.