Liberals trimming small- business tax rate to stanch political bleeding
The Trudeau government took the first of several steps Monday to stanch the bleeding from a self- inflicted political wound, resurrecting a campaign promise to cut taxes for small businesses outraged by its controversial taxreform proposals.
Prime Minister Justin Trudeau promised to gradually trim the small- business tax rate to nine per cent by 2019, down from its current level of 10.5 per cent, and also to make further changes to the plan that triggered the angry backlash from entrepreneurs in the first place.
“This tax cut will support Canada’s small businesses so that they can keep more of their hardearned money, money that they can invest back into their businesses, their employees and their communities,” Trudeau told a news conference in Stouffville, Ont.
The small business tax rate will fall to 10 per cent in January 2018 and again to nine per cent in 2019.
Doctors, lawyers, accountants, shop owners, farmers, premiers and even some Liberal backbenchers have denounced the tax proposals, contending they’d hurt the very middle class Trudeau claims to be trying to help.
Trudeau and Finance Minister Bill Morneau have said the reforms will be designed to ensure they target wealthy individuals who’ve used the incorporation of small businesses to gain what the government maintains is an unfair tax advantage.
In hope of calming critics, Trudeau also announced Monday he will abandon at least one of the
tax- reform elements: changing the lifetime capital gains rule, which is an adjustment intended to avoid negative impacts on the intergenerational transfer of family businesses, like farms.
He also said the government will simplify the change aimed at limiting the ability of business owners to lower their personal income taxes by sprinkling their income to family members who do not contribute to their companies.
However, Trudeau did not offer details on the income- sprinkling simplification. He said more it would be “made clear” as the government moves forward.
Trudeau said nothing Monday of any impending changes
to what is perhaps the most- controversial aspect of his tax proposals and, potentially, the most lucrative for government coffers: limiting the use of private corporations to make passive investments unrelated to the company.
The government is expected to announce more changes related to its tax proposals later this week.
Morneau, who’s been tasked with the difficult job of trying to sell the government’s tax proposals to the public and even fellow Liberal MPs, joined Trudeau at Monday’s announcement.
“I spent the last few weeks travelling the country, listening to people,” he said. “We know that our current system just isn’t
fair. It rewards people who are successful more than it rewards people who are working hard to be successful.
“We didn’t design the system that we inherited, but we’ve made clear that we intend to fix it. We’re going to leave a fairer system behind for the next generation.”
Trudeau campaigned in 2015 on a promise to reduce the small business tax rate to nine per cent from 11 per cent over three years.
But he announced in Budget 2016 he would freeze the rate at 10.5 per cent, cancelling in the process a legislated reduction to nine per cent instituted by the previous Conservative government.