General Motors announced last fall that it was laying off 1,200 at its plant in Ingersoll, Ont.

The company said it would offer six-month severance to hourly employees, with the potential for lump sum payments and other benefits.

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For workers receiving lump sum payments, GM is required to withhold any taxes from that amount.

The federal Conservatives want that to change.

Conservative Leader Pierre Poilievre penned a letter Sunday, co-signed by labour critic Kyle Seeback and local MP Arpan Khanna, addressed to Finance Minister François-Philippe Champagne calling for an exemption to the withholding taxes that ding severance pay.

The Conservatives argue taxes on a big chunk of GM’s lump-sum severance payments could deprive out-of-work employees of “tens of thousands of dollars,” adding “insult to injury.”

What’s the truth here?

How severance pay works

Typically, severance is paid out either as a salary continuance or a lump sum.

A salary continuance means the worker gets paid as usual for the length of the severance period. Taxes are deducted from those pays.

Lump sum is usually a one-time payment that covers the entirety of the severance owed.

The company deducts taxes from that total.

How much are we talking about?

It depends on how much severance you’re taking home.

According to employment law firm Samfiru Tumarkin, in Ontario that ranges from 10 per cent for amounts up to $5,000 to 30 per cent if you’re bringing in more than $15,000.

That doesn’t mean you’re getting taxed higher than if you get paid out over time. It’s just how the taxes are collected that is different.

The final amount you owe or receive as a refund depends on your total income for the year.

What does this all mean?

The Conservatives say that workers need that severance money now and can’t wait to collect a refund when they pay their taxes.

“They can’t wait a year and a half for that money to come back. We all see the numbers of food inflation at record numbers — 6.2 per cent, double that of the U.S,” Khanna, whose Oxford riding includes the CAMI plant, told reporters at West Block on Monday.

Considering Ontario continues to bleed manufacturing jobs, there’s some sense in what the Conservatives are proposing. Workers might not be able to find another job and that would likely put them in line for a sizeable refund.

When asked by iPolitics about why this offer would only apply to GM workers, Khanna said the Conservatives were “open to making sure that other workers enjoy the same benefits that these workers do in GM.”

“It’s important we take these steps and we’re willing to work with the government,” he said.

“The government often talks about collaboration. We are calling on the finance minister to work with us, sit down with us and find [the] relief we could provide to the workers during these tough times.”

Now or then?

It’s a simple question of when to pay the taxman — now or next year.

But there’s really no choice.

The federal Liberals said they’re not open to make an exemption to how taxes are withheld for auto workers.

John Fragos, a spokesperson for Champagne, said the government is “not introducing tax measures that would withhold pay nor have we done anything or proposed introducing anything that would corroborate that.”

“Taxes are paid on income earned, including severances. This isn’t new policy,” he told iPolitics in an email.

“What’s more, the government cannot unilaterally carve out certain taxes on earned income without adopting and applying that across the board, but that aside – what the Conservatives are proposing we do would effectively strip the government of a vital fiscal tool, limit our ability to respond to crises like the one we are living through and undermine our industrial advantage. That’s not only bad policy, it’s political malpractice.”

Instead of changing this policy, Fragos said the government is working with stakeholders to “introduce support measures that would protect Canadians and meet their immediate needs.”