Why small business is making a big deal about tax changes

The Liberals are making a huge mistake by sticking to their guns on changes to Canada's tax code and it could back to bite them

Dear Messrs. Trudeau and Morneau:

So, small businesses.

Almost 12 years ago, I started one. It was quite a thing.

Before that, I’d been special assistant to Jean Chretien on Parliament Hill. I’d been a partner at a Bay Street law firm. I’d been a vice-president at a Vancouver ad agency. I’d been a reporter at a couple newspapers.

All of those places couldn’t have been more different. But they all had one thing in common: in every one, I worked for someone else.

My bosses (that Chretien guy in particular) were mostly terrific. They were good to me.

But I wanted to go out on my own. I wanted to see if I could take what I’d learned – as a journalist and working for Chretien, in particular – and do something that was different than what everyone else was doing. A war room for hire: that’s what I wanted to do.

So I did. Developed a business plan, lined up as many clients as I could, hired a few young people, found some space and got a loan to cover payroll until we got on our feet. I called it the Daisy Group, after the famous ad from the 1964 presidential campaign.

There’s nothing quite like laying awake at night, wondering if you’ve made the biggest mistake of your life, if you’ve put your four kids in jeopardy by starting a small business. And then there’s nothing like that first morning, either – for us, May 1, 2006 – when you open the doors for the first time and a client walks in.

Anyway, we made it work. We made it into a success. I owe it to some amazing clients, and to some amazing young people who worked for me and with me. I learned from them and I hope they learned something from me.

And we’re still here. Still have clients, still have amazing young people working with us. It’s corny but I’m pretty proud of that. I’m proud that I made something and then made it better with the help of others (my wife Lisa in particular).

I’m not going to lecture you about why your changes to the rules governing small businesses are an unmitigated disaster. You’ve already received an earful from Liberal MPs, who told you at the Kelowna retreat – and who told the media, on the record and in no uncertain terms – that you’re making a mistake.

You are.

Your plan to prevent us from hiring our kids and lessening our taxes a bit? I’ve employed most of our kids as summer students. It’s helped me and it’s helped them. But you want to make the meagre benefits that flow from that illegal. It’s like you’re saying we small business owners – the family who runs the convenience store down the street or the restaurant you guys go to – are somehow akin to crooks, hiding untold millions in a Caribbean tax haven.

Also a mistake is what you want to do with so-called passive income. That’s the money that a small business makes, that small business owners like me want to leave in the business. I’m still going to pay tax at a high rate if I use that extra income as a dividend or something, later on. For reasons that are beyond my understanding, however, the tall foreheads at the Department of Finance think it’s illegitimate that small businesses would want to keep income invested in the business – to, you know, grow it and hire more people.

A third area of controversy, in which some owners convert what would have been taxed as salary or dividends into capital gains, shouldn’t be. On that one, I think you’re probably right. I know some doctors and lawyers are upset about you taking away those sorts of tax planning measures, but I’m not one of them. That kind of thing favours professionals who already earn big bucks and that isn’t terribly fair to others.

But the main problem isn’t quite so much one tax measure or another. It isn’t the policies, per se.

It’s the way you’re handling this. Small business folks like me, various experts, the Conservatives, the New Democrats and even your own MPs are telling you that you’re making a mistake. And, despite that, you insist you’re still going ahead.

No changes, no compromise, no acknowledgement that you might be wrong on a couple things. One of your backbench supporters even likened those of us who are worried to Marie Antoinette, eating cake and living in gated communities. He deserves to be kicked out for that.

I’m a small business owner. Some nights, I still lay awake way for hours, worrying about payroll, worrying about losing some business. You two, where you work? I don’t think you ever have. But worry you should, fellas.

This small business thing? It’s big.

Sincerely,

Etc.

Troy Media columnist Warren Kinsella is a Canadian journalist, political adviser and commentator.


business taxes canada

The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

Leave a Reply