Good and bad for small business

One of the biggest days of the year for any head of an advocacy organization is federal budget day (a colleague calls it the lobbyist’s Christmas). While most lobby groups are anxious to learn how much the government will spend on them or their cause, my group — the Canadian Federation of Independent Business — is primarily focused on how much of their own income Ottawa will let our members keep.

Last week’s budget was a dramatic improvement over the Liberals’ inaugural one last year. My primary emotion was one of relief. There had been persistent rumours Ottawa would raise capital gains taxes or even cut the Lifetime Capital Gains Exemption (or, as I call it, the retirement fund for most small business owners). These things did not happen, and that is good news.

However, it’s troubling that many of these key small business tax measures are up for review later this year. The budget flagged concerns that some of the tax provisions available to private corporations can “inappropriately reduce personal taxes of high-income earners.”

It cites the ability of small business to “sprinkle” income to family members with lower personal tax rates, the ability to hold “passive” investment income in the corporation, and convert business income to capital gains. While Canadians should not set up fake businesses or bend rules to take unfair advantage, several of these provisions are important measures that make entrepreneurs’ endless hard work worth it.

The budget does have several big positives for small business. New training investments look promising, including $1.8 billion to expand the Labour Market Development Agreement and an additional $900 million for Workforce Development Agreements. Training — particularly informal, on-thejob training — is incredibly important and expensive for entrepreneurs.

There is also a new procurement initiative to support innovative entrepreneurs, and measures to make it faster and easier to employ foreign workers.

A renewed effort on an inter-provincial Canada Free Trade Agreement is another sign the government is serious about cutting the red tape stifling growth and innovation.

And while a review of key small business tax measures is worrisome, I’m pleased the government may consider the terrific private members’ bills from NDP MP (and leadership candidate) Guy Caron and Liberal MP Emmanuel Dubourg, who have fought to ensure it is not more expensive to sell a business within your family than it is to a stranger.

The projection for an increase in the Employment Insurance rate by three per cent in 2018 is a negative development. By then, the payroll budgets of every business will have increased for six straight years (taking into account the 2018 EI hike will be followed by five years of CPP premium hikes starting in 2019). Not only does this mean a smaller paycheque for Canadian workers on Jan. 1 each year, it hampers small businesses’ ability to raise salaries and wages.

Though there were no massive spending initiatives, concerns over government debt and deficits has become the No. 2 issue for our members, just behind the total tax burden. Unfortunately, this budget provides no plan to get back to balance over the next five years. There isn’t even a plan to get down to the $10 billion deficit promise of the last election.

I urge the government to introduce a plan to get back to a balanced budget before today’s deficits become tomorrow’s tax hikes.

LAST WEEK’S BUDGET WAS A DRAMATIC IMPROVEMENT.

COLE BURSTON / BLOOMBERG Finance Minister Bill Morneau discusses his federal budget at the Canadian Club and Empire Club of Canada in Toronto on Friday. Dan Kelly writes that his primary reaction to last week’s budget was one of relief.