The Ontario and federal Liberals are discovering that, once lost, the love of small-business owners is hard to win back.
But they are trying.
Ontario Finance Minister Charles Sousa declared Tuesday in his autumn fiscal update that the government will cut the small-business tax rate by a percentage point, to 3.5 percent, on Jan. 1. Additionally, it will roll out $500-million in new programs for smaller businesses.
It’s no denying that this bundle of goodies comes as Ontario is poised to put in place the Fair Workplaces, Better Jobs Act (Bill 148), highlighted by a increase in the minimum wage to $15 an hour from $11.60, together with extensions to vacation, medical and parental leave. Business groups have warned that the legislation will place 185,000 jobs in danger.
Ontario’s olive branch comes only weeks after the federal Liberals backtracked on attempts to close what they characterized as tax loopholes benefiting small-business owners. Last month, Finance Minister Bill Morneau left or altered a set of planned tax changes after extreme blowback from small-business groups. And as with Ontario, Ottawa recently announced it would lower the national small-business tax rate to 9 percent in 2019 from the present rate of 10.5 percent.
British Columbia and Saskatchewan also have announced tax relief for small companies lately.
Efforts to win the support of a disgruntled constituency follow a sudden burst of activism in 2017 by store owners, farmers, physicians and other small-business owners across Canada. The year will go down as the moment when small-business owners awakened and jointly announced: “We are as mad as hell and we’re not going to take this any more.”
They’ve signed petitions, bombarded their elected officials with grievances, lobbied, tweeted and banded together in new classes, like the Coalition for Small Business Tax Fairness and the Maintain Ontario Working Coalition.
Their ire isn’t only about the minimum-wage increase and arcane federal tax changes. They whine about a litany of national and provincial steps since the last recession which are driving up prices and making them less aggressive. The frequent list of gripes includes fresh carbon taxation, increasing electricity bills, looming hikes to Canada Pension Plan contributions and a high federal-provincial tax rate for people that now exceeds 50 percent in many provinces.
Wage expenses, taxation and regulations routinely top the list of grievances among business owners, according to the Canadian Federation of Independent Business’s monthly business barometer poll.
CFIB president Dan Kelly says he is out to debunk the widely held belief that “owning your own business is a licence to print mone”
The CFIB has additionally complained that the government “does not know how a small business operate”
Attempting to mollify the discontent is partially about politics. In both instances, the Liberals are facing challenges on both the left from the NDP and on the right from the Conservatives as they look ahead to confronting voters. Their belated outreach to the business lobby indicates they might be feeling more intense pressure from that side of the political spectrum and are ready to spend money to win back their support.
It might also be an omen about the destiny of the innovative economic policies championed by Prime Minister Justin Trudeau and Ontario Premier Kathleen Wynne.
Mr. Trudeau’s and Ms. Wynne’s rhetoric has not changed. But their recent efforts to appease the business community might be a tacit acknowledgment that they have moved up to they dare on taxation, income inequality, climate change and labor rules.
Complicating their calculation is the uncertainty over where the United States is led, under President Donald Trump, on taxation and climate policies.
The small small-business tax rollbacks in Canada are a drop in the bucket compared with the gigantic corporate tax cuts being proposed by Republicans in Congress. It might leave Canada at a competitive disadvantage.
If the U.S. goes big on tax cuts, then anticipate Canada’s newly energized small-business lobby to dial up its outrage, again.
Courtesy: The Globe And Mail