The Trudeau government is standing fast against mounting outrage over its proposals to change taxation of incorporated family companies and their owners. It is doing two things: showing its disconnection from the people who own and work at such companies, and badly underestimating the political risk it is taking. The 63-page paper that started this was issued in July, including 25 pages of draft legislation. Some provisions will be retroactive to the date the paper came out (July 18) and others would apply for the 2017 and 2018 tax years. The tax proposals are so complex that tax accountants and lawyers, including the largest national accounting firms, cannot explain them in plain English. A public consultation period during which the government is pretending to receive feedback ends on October 2. However no finance minister or prime minister sincerely interested in taxpayer and tax planner comments and suggestions would be going around defending the plan against all comers.
This is not the place to even try to describe this monstrous scheme. Google canada tax plan morneau and talk to a tax accountant, if you can find one: the good ones are already up to their eyeballs. Tax accountants say these are the most serious tax reforms since 1971 when the government of Trudeau I introduced taxes on capital gains, on the advice of the infamous Carter Commission. With confiscatory income tax rates, it put Canada on the road to the highest tax burdens in the western world while continuing to run the biggest budget deficits Canada has ever seen, before or since if in constant dollars. The government, that is to say elected members and ministers, are not smart enough to think this up all by themselves. This has the fingerprints either of Gerald Butts, the prime minister’s unknown, unelected, unseen one-man brain trust and the Steve Bannon of Canada, or a cell within the tax department that has noticed while auditing tax returns that some small business taxpayers are not paying taxes at the rates they are paying. This reeks of envy and jealousy on behalf of the lowest class of the Liberal support base. Probably similar suggestions were made by the career professional tax collectors to the Harper government, which undoubtedly told them where to go.
It’s a done deal. The finance minister, the prime minister and the tax department never had any intention of being influenced by anything the public or tax professionals had to say, let alone the small business lobby. Even if they were closing loopholes, the changes will increase federal revenue by a peanuts $250 million a year out of the total tax take of $300 billion. This is not
about raising revenue or cutting the deficit. It is about persecuting and victimizing a particular small class of people and preventing their success from being aided or abetted by the tax system.
But these are not tax loopholes. They were put in the law to reflect differences between the situations of salary and wage earners who take no business risks and entrepreneurs who put their livelihood and savings on the line every morning. Once upon a time taxation of small businesses took into consideration the ways in which their situation is different from that of large corporations and the way the situation of entrepreneurs differs from that of salary and wage workers. Taxation of farms, as proprietorships, partnerships or corporations, also reflected the uniqueness of farming. Once upon a time. Small business owners are excluded from unemployment insurance, pay themselves the minimum wage only if their companies can afford it, have no backstop in case business goes badly and benefit from no labor law or code. They are on their own, including against this savage socialist attack. Like Karl Marx, this government thinks tax fairness is achieved by cutting down those who are successful. The more successful they are, the more harshly they are to be treated.
The finance minister said and the prime minister parroted that the two-thirds of small business owners who earn $73,000 a year or less will not be impacted by the changes. The other third can go to hell. Compare that to the average federal civil servant who costs the country $114,100 a year, has lifetime job security, the most powerful union to wring out regular raises and the sweetest pension benefits in the western world. This is the Liberal value scale. The Trudeau government is exposing itself for what it really is. There is no way out of this except regime change in Ottawa. No Conservative government would ever do this. Any NDP government would do it. It’s not the first Liberal assault on small business. The Harper government had set phased reductions in the federal income tax rate on small companies from 13% when it came into office; it would have reached 10% in 2016 had Morneau not cancelled it as soon as he could.