Farmers’ anger growing with tax-happy Liberals

Trudeau’s income-splitting measures bad policy, bad politics, writes Kevin Hursh.

Prairie farmers have shown little support for federal Liberals since the government of Pierre Trudeau, and now Justin is providing a whole new generation of farmers with reasons to seethe.

In between Trudeau senior and Trudeau junior, the Liberals managed to enrage most of rural Canada with an ill-conceived long gun registry.

The most recent outrage comes from the proposed corporate tax rule changes. They’re bad politics and in many ways bad policy. Farmers are united in opposition and they stand with other small- and mediumsized business owners across the country.

According to the 2016 Census of Agriculture, only 25 per cent of Canadian farms are incorporated. However, incorporated farms account for the vast majority of farm receipts.

While some incorporated farms will remain relatively unscathed, the crackdown on income-splitting and the earning of passive income within a farm corporation will affect many.

It’s true the vitriol has become a little extreme, but that only speaks to the passion involved. The official consultation period has ended, but businesses don’t feel like anyone has been listening to their concerns.

Assuming some rebalancing of personal versus corporate tax rules is warranted, what should the government have done differently?

First of all, the prime minister and his finance minister shouldn’t call them tax loopholes. The rules are set up and people follow them. “Loopholes” makes it sound underhanded.

If you determine that corporate tax rules need to be adjusted or tightened, don’t try to do it all at once. Addressing income sprinkling or passive income individually would have been ambitious enough without doing both and then adding rule changes on converting income to capital gains.

And while adjusting the rules, find ways to make the tax system simpler rather than adding to the complicated mess. For instance, the new Tax on Split Income (TOSI) assumes there is one corporate founder and other family members only receive income to save tax. How will the Canada Revenue Agency reasonably determine whether a family member’s contribution is worth $30,000 or only $15,000?

If the government had moved more slowly, addressed one issue at a time with a detailed plan and truly consulted and listened to the business community, they could have saved a great deal of political fallout.

The majority of Canadians and even the majority of farmers are not incorporated, so it might be assumed that public opinion is on the government’s side. That doesn’t appear to be the case. An affront to small- and mediumsized business will not make regular taxpayers any richer. Instead, it will have a stifling effect on the economy and job creation.

Beyond the issue of tax fairness, taxes in this country are just way too high. Of course, the new money grab on the horizon is the carbon tax Ottawa threatens to impose on an unwilling Saskatchewan government. While climate change mitigation has a broad base of support within the Canadian population, look at it from a farmer’s point of view.

Even if a carbon tax is rebated on farm fuel, other inputs ranging from fertilizer to custom trucking will still be hit. What’s a farmer to do? Electric tractors aren’t available and crops don’t do well without fertilizer and weed control.

A tax is supposed to reduce carbon emissions, but what can a farmer adjust? Crops under the minimum tillage now widely practised in Saskatchewan sequester carbon in the soil. So do grasslands. Farmers see themselves as part of the solution rather than the problem, but a carbon tax will hurt agriculture and the entire resource economy.

And for what? Any reduction in carbon emissions will ultimately fall far short of targets and the impact on global climate change will be negligible.

About the only faint praise you might hear for Justin Trudeau from a Saskatchewan farmer these days is, “at least he isn’t Donald Trump.”