Before Finance Minister Bill Morneau launched his broadside assault on Canadian entrepreneurialism this summer, he probably should have brushed up on his Sun Tzu. The great ancient Chinese military strategist and philosopher believed you must “know your enemy” if you are to defeat them in conflict.
Whether Morneau meant to declare war or not, he certainly did so when he announced sweeping reforms to how Canadian private corporations are taxed back in July.
Morneau wants to crack down on business owners paying wages or salaries to immediate family members in lower tax brackets, restrict how businesses can invest their retained income, and prevent businesses from converting earned income into lower-taxed capital gains.
These exceedingly complicated reforms have ignited a firestorm that has united Canada’s business community against its government. Moodys Ganter Tax Law, for example, is fanning out across the country, hosting free information sessions about the issue. One calculation from a Toronto tax firm concluded the trio of tax changes could result in a total tax rate of 93 per cent.
According to Morneau, the changes are all about “fairness” and closing “tax loopholes” for corporate citizens who aren’t “paying their fair share.” During the 2015 federal election campaign, Liberal leader, and now Prime Minister, Justin Trudeau told the CBC that most Canadian small businesses are “just ways for wealthy Canadians to save on their taxes.”
This kind of tax-the-rich class warfare isn’t anything new, though its champions are usually not well-heeled urban centrists like Morneau and Trudeau, but if you’re going to go after the wealthy people, you better know who the wealthy people are.
The problem with government’s portrayal of small business owners as greedy, cuff-linked tax cheats gaming the system to squeeze out another yacht payment is that Canadians, almost intuitively, know it’s bogus.
Everybody knows a small business owner. Their kids play hockey with ours. They volunteer with us. They prepare our morning coffees and fix our toilets. Some of them even sign our paychecks. With the usual exceptions, they’re decent and generous people who still sweat over the same things the rest of us ordinary employees do: mortgage payments, retirement savings, and university fees, to name a few.
Yes, some of them are wealthy, but so what? Should it be government policy to punish law-abiding, job-creating entrepreneurs for the single reason that they’re financially successful? The government’s position seems to be that there’s an awful lot of money being made out there, they’re just not getting their hands on enough of it.
That is what’s most appalling about this whole thing. Forget the government’s villainous characterization of ordinary entrepreneurs, it’s the fundamental worldview from which it was conceived; that hard work, ambition, personal risk, and profit are merely another revenue stream for spend-happy politicians.
Morneau’s tax reforms are headed for a showdown in Parliament this fall. Conservative leader Andrew Scheer told an Alberta Enterprise Group audience in Edmonton on August 28 he would “take the fight” to the Liberals when the House reconvenes on September 18.
It’s certainly a fight worth having.
Brock Harrison is the vice president of operations for the Alberta Enterprise Group.