Backlash growing over business tax proposals
OTTAWA — Bill Morneau is scrambling to calm the fears of nervous Liberal backbenchers who’ve been inundated with complaints about the finance minister’s plan to eliminate what he says are loopholes that give some wealthy small-business owners an unfair tax advantage.
The finance minister hosted an hour-long conference call Thursday with Liberal MPs, aimed at listening to their concerns, giving them the tools to counter what he considers rampant misinformation about his plan and reassuring them that the government is open to adjusting the proposals to avoid unintended consequences.
That’s in addition to dozens of one-on-one calls Morneau and his staff have been making in recent weeks to quell anxiety among government caucus members.
The conference call came as Liberal MPs prepared to air their concerns and push for changes to the proposals during a caucus retreat next week in Kelowna.
And it came as opposition to the proposals intensified.
About 35 organizations across the country representing doctors, lawyers, farmers, financial planners, homebuilders, shop owners and other incorporated small businesses came together Thursday to create the Coalition for Small Business Tax Fairness — billed as “a unified voice to oppose” the proposed tax changes.
“These proposals, while intended to target the wealthy, will hurt middle-class business owners from every sector of the economy,” said Dan Kelly, president of the Canadian Federation of Independent Business, a member of the coalition.
“In 10 years at the Canadian chamber, I’ve never seen an issue that has generated greater concern among our members,” added Perrin Beatty, president of the Canadian Chamber of Commerce, another coalition member.
Amid that rhetoric, Morneau spokesman Daniel Lauzon confirmed that the minister spent more than an hour Thursday on a conference call with Liberal backbenchers.
The backlash has been building since mid-July, when Morneau released a controversial, three-pronged plan aimed at closing tax loopholes used by a growing number of small businesses, creating what he called an “unfair playing field.”
One change would restrict the ability of business owners to lower their tax rate by sprinkling income to family members in lower tax brackets, even if those family members do no work for the business. Another would limit the use of private corporations to make passive investments in things like stocks or real estate.
The third change would limit the ability to convert a corporation’s regular income into capital gains that are typically taxed at a lower rate.
Among the arguments Morneau is trying to counter is the coalition’s contention that his proposals would affect all small business owners, two-thirds of whom are middle-class Canadians earning less than $73,000 per year. Morneau contends the proposed change to passive investment income will have negligible impact on anyone making less than $150,000 per year.