Fair play not that simple

When governments try to solve perceived problems, too often they go after the lowhanging fruit.

That helps explain the windstorm of criticism the federal Liberals are receiving from the business community over proposed tax changes to make it “more fair” and to “level the playing field.”

Those sorts of phrases will appeal to a lot of people, those not in business, who struggle with the income they earn and still feel they pay plenty in taxes. The idea that someone else is getting a break, or can find loopholes, will raise hackles. Politicians know the ring their policy will have with them.

And if it were as simple as all that, fine, fill the loopholes already. But small business owners – you know, those entities that governments simultaneously call the backbone of the economy – are offering solid reasons why this could kill them and a lot of entrepreneurship.

Sure, they might well say that out of sheer self-interest. But if it means a significant blow to enough of them – and the economy and jobs along with it – any government should carefully weigh the pros and cons.

Part of the problem in this case and many others involving the government’s handling of any policy is that few of those politicians are or were small business owners. They aren’t familiar with the hardships, the challenges and above all the risks. Running a business is nothing like receiving a steady paycheque – it has its rewards, but also inevitably its setbacks.

Among the proposed policy changes are a move to eliminate an incentive that allows small business owners to shift some income to family members whose personal income falls within a lower tax bracket – even if the family member isn’t directly involved in the business.

Another reform would limit the ability to convert a corporation’s regular income into capital gains that are typically taxed at a lower rate.

Comments from business owners focus on the need for incentives – without them, they contend, they might never have got started. Many entrepreneurs take significant personal financial risk. Also, why not go after the big players, those who deliberately and subversively abuse the system?

Chambers of commerce across the country have also urged the government to tread carefully.

Across-the-board flat tax rates do sound fair, and the way to go in theory.

But the public knows full well that governments provide financial support for various startups, or to help a business entity that’s struggling – to the point of including some multi-billion dollar operations. There’s nothing that angers people more in this regard than the thought of corporate welfare.

Are we to take it then that in eliminating these particular incentives to small business, government wants to choose who it backs? That’s seldom a good idea – policy wonks trying to pick the winners.

If the federal government wants to close loopholes and help ease the tax burden on average Canadians, how about taking on the real opponents. Find the ultrawealthy individuals and corporations who manage to shift their wealth to offshore holdings and save billions. It might be a lot more work, but the payoff would make it worthwhile.