On­tario small busi­nesses to get tax re­lief ahead of elec­tion

The Globe and Mail (Atlantic Edition) - - FRONT PAGE - JUSTIN GIOVANNETTI TORONTO

The On­tario gov­ern­ment is of­fer­ing a tax cut to small-busi­ness own­ers wor­ried about an up­com­ing hike in the min­i­mum wage and is warn­ing that the hous­ing mar­ket will slow down over the next year as the pro­vin­cial Lib­er­als prepare their bid for re-elec­tion.

Fi­nance Min­is­ter Charles Sousa promised a small tax cut and $500mil­lion in new in­vest­ments for busi­nesses fac­ing rapid in­creases in wage and en­ergy costs. The small­busi­ness tax rate will fall from 4.5 per cent to 3.5 per cent on Jan. 1, the same day the min­i­mum wage jumps to $14 an hour from $11.60.

Mr. Sousa’s fall eco­nomic up­date also shows that, al­though pro­vin­cial rev­enues have grown over the past year due to a ro­bust econ­omy, the prov­ince has in­creased spend­ing to match. One sec­tor that has suf­fered is real es­tate, as the gov­ern­ment ex­pects new-home con­struc­tion to fall next year and said it ex­pects to col­lect $270-mil­lion less than pro­jected in land trans­fer taxes. De­spite that, the bud­get will re­main bal­anced this year and for the next two years, Mr. Sousa promised.

“We’ve ex­ceeded ex­pec­ta­tions and we’ve grown the econ­omy,” Mr. Sousa said af­ter tabling the up­date. The doc­u­ment, which typ­i­cally fo­cuses on the gov­ern­ment’s fi­nan­cial per­for­mance over the past six months, in­stead em­pha­sized which new pro­grams and spend­ing On­tar­i­ans could ex­pect in time for next year’s elec­tion. The prov­ince’s two op­po­si­tion par­ties were quick to ac­cuse the Fi­nance Min­is­ter of us­ing his eco­nomic state­ment as a pro­gram for Pre­mier Kathleen Wynne’s re­elec­tion.

Promis­ing a “strong and fair On­tario,” the eco­nomic up­date pointed to next year’s higher min­i­mum wage, a new phar­ma­care pro­gram for On­tar­i­ans un­der the age of 25, cheaper tu­ition, new day­care spa­ces, more fund­ing for se­niors, ma­jor tran­sit projects and a hous­ing plan that taxes for­eign­ers and freezes rent.

NDP Leader An­drea Hor­wath said the bud­get up­date would do lit­tle for the mid­dle class. “Peo­ple wanted to see some­thing that would deal with the hospi­tal grid­lock and hall­way medicine cri­sis that we have now,” she said. “There’s no new money.”

“They’ve hung their hat on a bal­anced bud­get and that’s where they are go­ing to get the money for all th­ese good­ies, ex­cept the Fi­nan­cial Ac­count­abil­ity Of­fi­cer and the Au­di­tor-Gen­eral have told us re­peat­edly that the bud­get is not bal­anced,” Pro­gres­sive Con­ser­va­tive fi­nance critic Vic Fedeli said.

Both of On­tario’s fi­nan­cial watch­dogs have warned over the past year that the prov­ince’s bud­get is at risk of not be­ing bal­anced, es­pe­cially in fu­ture years as more se­niors be­gin to stress gov­ern­ment pro­grams. On Tues­day, Mr. Sousa dis­missed the crit­i­cism, say­ing that the gov­ern­ment has kept its books un­der con­trol.

Tues­day’s move to cut the small­busi­ness tax rate came nearly a month af­ter the Lib­eral gov­ern­ment in Ot­tawa made a sim­i­lar prom­ise to cut the fed­eral rate. The over­all rate for an On­tario small busi­ness will drop from 15 per cent to­day to 12.5 per cent in 2019. Bank of Mon­treal chief econ­o­mist Dou­glas Porter said in a note that, with both tax cuts, “it’s un­for­tu­nate that the fo­cus on rate re­lief has fallen so heav­ily on one par­tic­u­lar sec­tor.”

Crit­ics were also quick to point out that the promised tax re­lief, which would lead to a max­i­mum $5,000 tax cut for a small busi­ness, would do lit­tle to help as wage bills swelled be­cause of the rapid min­i­mum wage hike.

“The tax cut won’t re­ally have much of an im­pact at all on our clients,” Mah­yar Han­so­tia, the pres­i­dent of ac­count­ing firm So­bel, told The Globe and Mail. The full tax cut for a prof­itable com­pany might cover the in­crease in min­i­mum wage costs for a sin­gle full-time em­ployee, he said. How­ever, the Fi­nance Min­is­ter ruled out any changes to the gov­ern­ment’s plan.

“We will not back down from th­ese com­mit­ments. An in­crease to the min­i­mum wage can­not wait. Peo­ple can­not wait, de­lay­ing an in­crease is deny­ing an in­crease,” Mr. Sousa said in the Leg­is­la­ture.

Within the hour, the Tories promised to do just that. While Ms. Wynne wants to in­crease the min­i­mum wage to $15 in 2019, the PC Party’s labour critic said that, if his party be­comes the gov­ern­ment next year, it would wait un­til 2022 to fin­ish the hike to $15.

The prov­ince’s Fi­nan­cial Ac­count­abil­ity Of­fice has es­ti­mated that more than 50,000 peo­ple could lose their jobs be­cause of the min­i­mum-wage in­crease – with the losses felt hard­est by teens and young adults. In re­sponse, the prov­ince promised a new in­cen­tive pro­gram on Tues­day for small busi­nesses that would pay $1,000 for each On­tar­ian un­der the age of 29 hired. The Tories called the new pro­gram a “bribe.”


On­tario Fi­nance Min­is­ter Charles Sousa, seen in Toronto on Tues­day, has ruled out any changes to the Lib­er­als’ plans to raise the min­i­mum wage: ‘De­lay­ing an in­crease is deny­ing an in­crease.’

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