Ot­tawa, On­tario move to make peace with small busi­ness

The Globe and Mail (Ottawa/Quebec Edition) - - REPORT ON BUSINESS - BARRIE McKENNA bm­ckenna@globe­and­mail.com

T he On­tario and fed­eral Liberals are dis­cov­er­ing that, once lost, the love of small-busi­ness own­ers is tough to win back. But they sure are try­ing. On­tario Fi­nance Min­is­ter Charles Sousa an­nounced Tues­day in his fall fis­cal up­date that the gov­ern­ment will cut the small-busi­ness tax rate by a per­cent­age point, to 3.5 per cent, on Jan. 1. It will also roll out $500-mil­lion in new pro­grams for smaller com­pa­nies.

It’s no co­in­ci­dence that this pack­age of good­ies comes as On­tario is poised to put in place the Fair Work­places, Bet­ter Jobs Act (Bill 148), high­lighted by a hike in the min­i­mum wage to $15 an hour from $11.60, along with ex­ten­sions to va­ca­tion, med­i­cal and parental leave. Busi­ness groups have warned that the leg­is­la­tion will put 185,000 jobs at risk.

On­tario’s olive branch comes just weeks af­ter the fed­eral Liberals back­tracked on ef­forts to close what they char­ac­ter­ized as tax loop­holes ben­e­fit­ing small-busi­ness own­ers. Last month, Fi­nance Min­is­ter Bill Morneau aban­doned or mod­i­fied a se­ries of planned tax changes af­ter in­tense blowback from small-busi­ness groups. And as with On­tario, Ot­tawa re­cently an­nounced it would lower the fed­eral small-busi­ness tax rate to 9 per cent in 2019 from the cur­rent rate of 10.5 per cent.

Bri­tish Columbia and Saskatchewan have also an­nounced tax re­lief for small busi­nesses in re­cent months.

Ef­forts to win back the sup­port of a dis­grun­tled con­stituency fol­low a sur­pris­ing burst of ac­tivism in 2017 by shop own­ers, farm­ers, doc­tors and other small-busi­ness own­ers across Canada. The year will go down as the mo­ment when small­busi­ness own­ers stood up and col­lec­tively de­clared: “We’re as mad as hell and we’re not go­ing to take this any more.”

They have signed petitions, bom­barded their elected of­fi­cials with griev­ances, lob­bied, tweeted and banded to­gether in new groups, such as the Coali­tion for Small Busi­ness Tax Fair­ness and the Keep On­tario Work­ing Coali­tion.

Their ire is not just about the min­i­mum-wage hike and ar­cane fed­eral tax changes. They com­plain about a litany of fed­eral and provin­cial mea­sures since the last re­ces­sion that are driv­ing up costs and mak­ing them less com­pet­i­tive. The com­mon list of gripes in­cludes new car­bon taxes, ris­ing elec­tric­ity bills, loom­ing hikes to Canada Pen­sion Plan con­tri­bu­tions and a top fed­eral-provin­cial tax rate for in­di­vid­u­als that now ex­ceeds 50 per cent in many prov­inces.

Wage costs, taxes and reg­u­la­tions rou­tinely top the list of griev­ances among busi­ness own­ers, ac­cord­ing to the Cana­dian Fed­er­a­tion of In­de­pen­dent Busi­ness’s monthly busi­ness barom­e­ter sur­vey.

CFIB pres­i­dent Dan Kelly says he’s out to de­bunk the widely held no­tion that “own­ing your own busi­ness is a li­cence to print money.”

The CFIB has like­wise com­plained that the gov­ern­ment “doesn’t un­der­stand how a small busi­ness works.”

Try­ing to mol­lify the dis­con­tent is partly about pol­i­tics. In both cases, the Liberals are fac­ing chal­lenges on both the left from the NDP and on the right from the Con­ser­va­tives as they look ahead to fac­ing vot­ers. Their be­lated out­reach to the busi­ness lobby sug­gests they may be feel­ing more in­tense pres­sure from that side of the po­lit­i­cal spec­trum and are will­ing to spend money to win back their sup­port.

It may also be an omen about the fate of the progressive eco­nomic poli­cies cham­pi­oned by Prime Min­is­ter Justin Trudeau and On­tario Pre­mier Kathleen Wynne.

Mr. Trudeau’s and Ms. Wynne’s rhetoric hasn’t changed. But their re­cent at­tempts to ap­pease the busi­ness com­mu­nity may be a tacit ac­knowl­edg­ment that they have moved as far as they dare on taxes, in­come in­equal­ity, cli­mate change and labour rules.

Com­pli­cat­ing their cal­cu­la­tion is the un­cer­tainty over where the United States is headed, un­der Pres­i­dent Don­ald Trump, on taxes and cli­mate poli­cies.

The mod­est small-busi­ness tax roll­backs in Canada are a drop in the bucket com­pared with the mas­sive cor­po­rate tax cuts be­ing pro­posed by Repub­li­cans in Congress. It could leave Canada at a com­pet­i­tive dis­ad­van­tage.

If the United States goes big on tax cuts, ex­pect Canada’s newly en­er­gized small-busi­ness lobby to dial up its out­rage, again.

Re­cent at­tempts to ap­pease the busi­ness com­mu­nity may be a tacit ac­knowl­edg­ment that [Ot­tawa and On­tario] have moved as far as they dare on taxes, in­come in­equal­ity, cli­mate change and labour rules.

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