In 2024, Canadians will experience significant changes in various tax categories, including the Canada Pension Plan (CPP), Employment Insurance (EI), carbon taxes, and alcohol excise taxes.
These changes are outlined in the Canadian Taxpayers Federation’s annual New Year’s Tax Changes report, reflecting the government’s efforts to adjust taxation and public revenue systems. Here’s a breakdown of what to expect.
CPP (Canada Pension Plan) Changes
The CPP will see notable changes in 2024, primarily affecting the maximum pensionable earnings and contributions:
- Increased Maximum Pensionable Earnings: The ceiling for pensionable earnings will rise, impacting the contributions required from both employers and employees. In 2024, the maximum contribution for CPP will be $3,867 per person, an increase of $113 for those earning $68,500 or more.
- Introduction of CPP2: A new tax tier, referred to as “CPP2,” will be introduced for incomes ranging from $68,500 to $73,200, with a maximum additional tax amount of $188. This effectively increases the total CPP contributions to $4,055 for those earning $73,200 or more, representing a combined increase of $301.
EI (Employment Insurance) Adjustments
The Employment Insurance (EI) program will also undergo changes in 2024, affecting both contribution rates and maximum insurable earnings:
- Higher Premium Rates and Insurable Wages: The maximum insurable earnings and the EI premium rate are set to increase. Employees will contribute up to $1,049, while employers will contribute up to $1,469, resulting in additional contributions of $47 for employees and $66 for employers earning $63,200 or more.
- Total Payroll Taxes: For employees earning $73,200 or more, the total federal payroll taxes (combining CPP and EI contributions) will be $5,104, with employers paying $5,524.
These changes are in response to increased demands for EI coverage, which aims to provide better support for workers in unstable employment situations.
Carbon Tax Increases
Canada’s carbon tax will rise from $65 to $80 per tonne in 2024, continuing the country’s efforts toward achieving net-zero emissions by 2050. The tax increase will affect fuel prices, with significant implications for both households and businesses:
- Impact on Fuel Costs: Starting April 1, 2024, the federal carbon tax will increase to over 17 cents per liter of gasoline and 15 cents per cubic meter of natural gas. The Parliamentary Budget Officer estimates that, even after rebates, the average household will pay between $377 and $911 for the carbon tax in the 2024–25 fiscal year.
- Broader Economic Effects: This increase is expected to raise the costs of goods and services due to higher transportation expenses, impacting everything from daily commutes to the price of consumer goods.
Alcohol Tax Hike
Excise taxes on alcoholic beverages, including wine, spirits, and beer, will increase by 4.7% on April 1, 2024. This tax hike is part of broader public health and revenue generation strategies:
- Increased Consumer Costs: Currently, taxes constitute over 50% of the cost of beer, 65% of the cost of wine, and more than 75% of the cost of spirits. The new tax increase will add approximately $100 million to Canadians’ annual alcohol expenses.
- Public Health Considerations: The tax increase also addresses concerns about public health, as excessive alcohol consumption is linked to long-term health risks that contribute to higher healthcare costs.
These tax changes reflect the government’s efforts to adjust fiscal policies in response to economic conditions and public health concerns.
While these adjustments are intended to improve public services and environmental sustainability, they also imply higher costs for individuals and businesses.
It’s essential for Canadians to stay informed about these changes and plan accordingly for their financial and business activities in 2024.
FAQs
What are the key tax changes for CPP in 2024?
The key changes include increased maximum pensionable earnings and the introduction of a new tax tier, CPP2, for higher income earners.
How will the EI contributions change in 2024?
The EI premium rates and maximum insurable earnings will increase, resulting in higher contributions from both employees and employers.
What is the new carbon tax rate for 2024?
The carbon tax will increase to $80 per tonne, affecting fuel prices and overall living costs.
How much will the alcohol tax increase in 2024?
The alcohol excise tax will increase by 4.7%, impacting the cost of beer, wine, and spirits.
How can these tax changes affect my finances?
These changes will increase the cost of living, including higher payroll taxes, fuel prices, and consumer goods, requiring careful financial planning.
