Government has a duty to make taxes fair to all

In the near future, Canada will hopefully see a needed debate about a tax system where the wealthy pay their fair share to support our collective goals.

But in the meantime, a painfully modest plan to close tax loopholes is being met with a disproportionate counterattack — raising the risk that we’ll never take real steps toward tax fairness.

In this year’s budget, federal Finance Minister Bill Morneau announced plans to crack down on corporate tax avoidance. At the moment, private corporations can split income for tax purposes regardless of who performs work for them, and amass large investments without paying normal tax rates.

The resulting loss of revenue from that tax dodging is relatively modest (a few hundred million dollars annually). But the unfairness is obvious.

Needless to say, few people have any sympathy for wealthy people using creative corporate structuring to avoid paying taxes. But in order to try to drum up public outrage, opponents of the proposed change have gone out of their way to tie the changes to specific professions, misleadingly portraying Morneau’s plan as an attack on doctors or other workers.

And unfortunately, they have ample reason to believe they can get Morneau to back off by changing the subject. After all, the Liberals’ 2015 platform included a substantially more important promise to treat stock option income similarly to other forms of income.

A special inclusion rate for stock options is currently used to avoid roughly a billion dollars in taxes every year. And half of that goes directly to Canada’s 100 highest-paid CEOs, whose compensation is often set up specifically

The large majority of workers who don’t have a need to incorporate will be unaffected.

to avoid taxes through that mechanism.

Unfortunately, faced with a lobbying campaign which pretended that the stock option loophole was somehow necessary for technology startups while ignoring its actual effect, the Liberals broke their promise.

Having decided they don’t have the spine to pursue revenue at the very top of the income spectrum, the Liberals have now moved on to a plan which would primarily close loopholes for the one per cent, while falling short of addressing the 0.01 per cent.

If Morneau follows through, professionals with standard corporate structures will lose some means to avoid paying the tax normally associated with their income level — while the large majority of workers who don’t have a need to incorporate will be unaffected.

Not surprisingly, though, those taking advantage of generous tax treatment for corporations have learned from the playbook which was used to keep the stock option loophole open. And they’re putting up a loud and ugly fight aimed at undermining the very idea of tax fairness.

Whatever one’s view of the legitimacy of tax avoidance, it’s preposterous to argue the government shouldn’t be able to respond by closing loopholes. And most of us should be directing our primary outrage at the already-privileged few who want to keep paying lower rates than people with far less income and assets.

Meanwhile, there may be much more at stake in the current debate than the few hundred million dollars covered by Morneau’s proposal.

While Morneau skirts around the edges of our tax system, several of the NDP’s leadership candidates have proposed far more ambitious plans to ensure that the wealthy pay their fair share. But if the Liberals mount a half-hearted defence of their own limited measures, they — and the commentariat — are all too likely to conclude that popular and necessary steps toward tax fairness are political non-starters.

And if we allow higher-income Canadians to stifle any talk of a fair contribution to our country, it’s everybody else who will be left to pay the price.