Liberals ‘throwing money’ at fallout from minimum-wage hike, Tories say
The Ontario government is cutting taxes on small businesses and subsidizing companies that hire young workers, compensation for an imminent hike to the minimum wage that the opposition parties say will still be devastating.
“About a third of jobs in Ontario are in small and medium-sized enterprises,” Finance Minister Charles Sousa told the legislature in his annual update on the state of the province’s books Tuesday afternoon. “To support these businesses, I am pleased to announce that the government is introducing more than $500 million in new initiatives over the next three years to help them grow and reduce costs.”
The tax cut is the marquee item, trimming the province’s take of small-business profits from 4.5 per cent to 3.5 per cent.
The federal government is cutting its share of the same tax, as Sousa’s federal Liberal counterparts try to fix some of the political damage from their crackdown on personal corporations some people use as tax shelters.
“With the changes proposed by the federal government, the combined federal-Ontario corporate income tax rate for small businesses would be at its lowest in over 30 years,” Sousa said.
The cut, to the taxes on a business’s first $500,000 in income, kicks in Jan. 1. It’ll amount to a $150-million annual reduction in provincial revenues by 2019, Sousa forecasts.
The government also plans to spend $124 million — over three years — to give employers incentives to hire, train and keep young workers, those most likely to be paid minimum wage. Employers have complained that brand-new workers often aren’t really worth the money they’re paid, growing into their wages only after they gain experience.
This is all supposed to cushion the government’s plan to hike the minimum wage to $15 an hour by 2019 and require employers to supply other benefits to all workers, which Sousa said won’t change.
“We will not back down from these commitments,” he said.
“An increase to the minimum wage cannot wait. People cannot wait. Delaying an increase is denying an increase.”
That’s still a problem, shot back Progressive Conservative finance critic Vic Fedeli. Cutting a tax on business profits assumes businesses have profits, he said; the employers who are in the biggest trouble from the minimum-wage hike don’t have them. He cited a restaurant he knows where the owner clears $100,000 a year in profits but will have to pay $152,000 more in wages, leaving no earnings to cut the taxes on.
“Rather than slow down their minimum-wage hike, they are just trying to throw more money at the problem,” Fedeli said.
“This Band-Aid will do nothing for a business with no income or employees left.”
New Democrat finance critic John Vanthof said the government should have done more to make jobs less precarious, shouldn’t have sold a majority share in the profitable Hydro One utility to pay for infrastructure projects, and shouldn’t have borrowed billions of dollars to cut consumers’ electricity bills.
Otherwise, Sousa’s update is mostly a rehash of things the government promised in the full budget in the spring, which Sousa reassures us are indeed happening. That’s fine — autumn budget updates aren’t a time for radicalism unless there’s a crisis that needs answering.
One thing on which to cast a beady eye, though, is the shrinking of the contingency reserve, the margin of error the government gives itself.
This year’s corporate-tax take is a bit bigger than expected ($1.6 billion, to be exact), personal income-tax revenues are a bit smaller ($1.8 billion), revenues from Crown corporations are up a bit ($200 million), and it all just about evens out. If it didn’t that’s what the reserve would be for, at least notionally.
In practice, the contingency is the funny-money section of the budget, cash the government doesn’t intend to spend but can repurpose however it wants later. It can go to some program that suddenly seems shiny and useful but that the Finance Ministry hadn’t thought of previously. It can go to tax cuts.
Or the government can declare that having exactly the leftover money it expected to have is a mark of its own superior management of the treasury.
Historically, that’s been about $1 billion. But the contingency reserve is down to $500 million for this year, the same amount next year, and $800 million the year after that, the update says, “reflecting confidence arising from a strengthening economy that is enabling the province to invest in the priorities that matter most to the people of Ontario.”
You might think a stronger economy would increase revenues and reduce expenses, leaving the government with more money even if it nips taxes a little. Instead, we have a chance to operate even closer to the line, Sousa is saying. Bring in more, spend more, and keep less margin for error. We could just as easily run the argument the other way and have it make just as much sense: “A weakening economy requires the province to invest more in economic growth, running a greater risk of deficit, to preserve a prosperous future for the people of Ontario.”
But, you see, prudence is a thing to tout between elections, not in an election year. Prudence doesn’t win elections.
New programs and tax cuts win elections, if anything does.
So that’s what we’re getting.
New programs and tax cuts win elections, if anything does. So that’s what we’re getting.