BE CLEARER ON TAX PITCH
The return of Parliament brought fresh opposition attacks on Finance Minister Bill Morneau’s proposed tax changes for corporations. Let’s be clear about how the government should not pitch its plan to Canadians.
First, stop using the loaded term “loopholes.” When governments create policies that permit taxpayers to shield parts of their income, it’s in the expectation that people will use these tools. The measures are legal; they aren’t “loopholes,” a word that connotes sneakiness.
Second, stop implying that only “rich” Canadians take advantage of the rules around incorporation. Citizens and businesses that choose to incorporate can include not only doctors, but your neighbour running a freelance writing service from home, or a guy trying to start a consignment clothing operation.
Third, stop campaigning against the rich. Lots of high-priced professionals have used the current tax rules to keep more of their money, and some earn enviable incomes.
But “rich” should not be a four-letter word in a free economy; implying that successful entrepreneurs are enemies is playing the same low, populist, identity-politics game we frown on other countries’ leaders for doing.
Fourth, stop the drivel about these reforms being aimed at tax “fairness.” Canada has more special-interest tax benefits and boutique credits than you can shake a calculator at, each aimed at a different slice of voters, er, income earners.
Why might a government legitimately want to mop up the tax structure for corporations? Some economists argue that government has, for too long, played the role of risk mitigator, buffering small businesses from economic reality. Maybe this should stop.
Likewise, perhaps Mr. Morneau’s lengthy studies convince him that special policies on income-sprinkling, passive investments and capital gains just aren’t needed as incentives to entrepreneurship. If so, make that clearer.
Another potential merit, presumably, is that the plan will raise needed money. A government that predicted a $28.5-billion deficit for 2017-18 may think it has no choice. Well, say so.
A further potential plus is that making these changes may move us closer to “tax neutrality,” whereby everyone’s income eventually is taxed at the same rate, and the tax system itself is no longer the reason people make economic decisions. This would be a sound rationale.
Certain classes of taxpayers are not inherently more evil or pure than others, and craven implications to the contrary aren’t worthy of Canada. Tax policy is complicated; revenues are strained — we get that. Pitting us against each other is no way to deal with it.