A message for the prime minister and finance minister

It has been 55 days since the federal government shattered the hopes and dreams of thousands of small business owners and their middle-class employees.

On July 18, 2017, the federal government released a “consultation” paper on “proposed” changes to how small businesses are taxed. I write “consultation” in quotes because this is an insult. Seventy-five days is not sufficient time to respond and consult on such sweeping changes that will affect all sectors of the Canadian business community.

I put “proposed” in quotes because the federal government has already drafted the legislation. They appear to be bound and determined (if Finance Minister Bill Morneau’s tweets are any indication) to follow through, and the consequences are nothing but dire for small businesses and the hundreds of thousands of Canadians they employ.

I have been a chartered professional accountant for 25 years. I work with small businesses — electricians, consultants, flower shops, independent pharmacies. Perhaps what I find most troubling is that the federal government, in all its wisdom, has not adequately defined the problem it is try- ing to fix. There has been no discussion on what the government intends to do with the estimated $250 million in tax revenue. There is no conversation regarding addressing the $28-billion federal deficit. There is no discussion on improving government inefficiencies.

This government has said small businesses are the backbone of the economy and are responsible for the majority of job creation in Canada. Small business generates economic growth, provide much-needed services and supports quality of life for all Canadians. If they desire to strengthen the heart of the Canadian economy, why are they attacking small businesses?

What they are proposing is going to kill small business in this country and damage our economy. Basic economics states that when individuals are taxed higher they have less disposable income. This will result in less spending, which in turn will start a downward cycle of less earnings and less spending.

Increasing the burden of taxation on the small business owner will not improve the disposable income of the middle class or stimulate the Canadian economy. It will do just the opposite.

This is 2017

Prime Minister Justin Trudeau talks as if he is a feminist, but his actions with these tax proposals will have a disproportionate negative impact on women. The changes will hurt women who mortgaged their homes, or worked behind the scenes supporting their spouses’ business. These women are not eligible for CPP, have no indexed pensions and are the victims of these tax changes. This government has devalued their contribution to the family business.

Middle class

Trudeau and Morneau talk a lot about helping middle-class Canadians, but the changes they are proposing will hurt the middle class.

Seventy per cent of Canadians are employed by small business — if they aren’t the middle class, I don’t know who is. If the owners of these small businesses are going to close up shop because it is not worth it anymore, who is going to employee hundreds of thousands of Canadians?

How does increasing the tax burden on small business improve the standard of living for the middle class? Why is the solution put forth by the government to increase taxes to bring fairness? Why isn’t the solution to look to a more efficiently run government to allow for personal tax rate savings for Canadians to bring fairness? Why isn’t the solution to spend less or waste less rather than to tax more?

Families hurt

In the next 10 years, 7 out of 10 business will see a change in ownership as baby boomers hope to retire and leave their businesses to their sons and daughters. Under these proposed changes the exchange of moneys will be taxed twice — once on the owner, and the second time on the buyer. This will ruin the retirement plans of small business owners and make the purchase of the business unattainable for the next generation.

Bad for rural Newfoundland and Labrador

Rural Newfoundland and Labrador is filled with these small businesses that are counting on their sons and daughters to take over the family business.

Not only will this affect business transfers, but rural Canada can expect their family doctors, who are highly educated and therefore highly mobile, to give up their practises and move to salaried positions in hospitals or clinics where they are not penalized for operating a business.

Next week, Trudeau and Morneau will be in St. John’s for a cabinet retreat. I want to remind them of two things they said.

“We need middle-class Canadians to have money in their pockets to save, invest and grow the economy, to bring back fairness and to strengthen the heart of the Canadian economy,” Trudeau said.

“We will consider the gender impacts of the decisions we make,”

the Liberal platform promised.

“Public policies affect women and men in different ways,” Morneau said.

I invite you, Prime Minister Trudeau and Minister Morneau, to reflect on those words as you meet your cabinet colleagues and discuss these tax changes.