Another week meant seven days of non-stop whining and sniveling by the elites and their misguided supporters about Trudeau's tax changes on small businesses. The Blue Tie guys have stepped up the game – blaring over-simplified effects and dishonest "facts" about the changes in chamber's of commerce across this country. Scheer himself has grown a bit of a spine with the rest of the party ready to cheer his every word on the benches behind him; standing up in the House of Commons multiple times relaying the party strategy on the plights of these fictional middle-class "Average Joe" business owners who will be affected by the change.
Are taxes going to go up for successful business owners? Sure they are. If they are paying dividends to their spoiled adult children who do zero work for their company. If their business has gone up in value way beyond $1,000,000 from original input costs, making it worthwhile to pay their accountants thousands of dollars a year to execute shady transactions across multiple corporations owned by the same family to pay taxes on personal income at just half the rate of other people at their income level. And finally, if they are using their corporations to create a personal "Super-RRSP" for retirement saving instead of using those profits to reinvest and grow the business while saving for retirement in RRSPs, TFSAs, and Cash/Margin Accounts like the rest of us.
I for one don't feel a tad sorry for the whiners and snivelers and you should not either. These changes are not going to be retro-active (read the legislation yourself if you don't believe me) so they won't drastically effect those individuals who have already benefited from these outsized tax breaks. And don't worry, no one with any sanity will be paying a 73% tax rate as the Blue Ties are suggesting will happen.
Global Reality Check
Small business owners who benefited from these tax breaks need to get a big reality check. Small business corps in Canada benefit from some of the lowest corporate tax rates in the developed world – 12.5% to 15% depending on the province. These rates are tax-haven lows.
In Ireland (one of those tax havens the lefties and righties love to hate on) the corporate tax rate is 12.5% on business income, 25% on passive (investment) income, and 33% on capital gains income. In low tax Singapore the corporate tax rate is 17% across the board. In the U.K. it's 19% for active business income and 25% on passive type income. In the U.S. corporate tax rates ranges from 15 - 35% on a sliding scale with a 20% alternative minimum tax on corporations that do funny tax things.
I could go on, but you get the point. Our corporations are taxed at very, very competitive tax rates and rightfully so. Corporate taxes are inefficient to collect and their accounting and filing imposes a large cost on businesses and the government. Corporations are really just fictional "beings" created out of thin air by complex laws anyways, so it doesn't make much sense to impose heavy tax burdens on "beings" which tangibly do not exist.
But that doesn't mean their human owners (shareholders) should benefit from complex strategies to pay less tax than their neighbours on their personal income. Personal income should be treated the same regardless of what you do for a living. This includes the politicians who gave themselves a voter-sanctioned tax-free status on a portion of their salaried incomes.
Hand Out Culture
The problem with our country is that everyone expects special treatment, hand outs, and other privileges from the government as if it were an organism on its own. They conveniently forget that the government is simply an executing body enabled by every voting and tax paying citizen of this country. The government doesn't exist without voters and without taxpayers. Taxpayers arguably being the more important of the two.
Every dollar in benefit paid to or received by one person means an additional dollar in tax paid by another. In a country of 36 million-odd people this is very easy to forget. Especially when we have a culture of hand outs and bail outs with rampant government paternalism.
Since people are by nature irrational beings with bleeding hearts who make poor and rash decisions, we people also pay for those decisions and it costs us dearly. But we willingly do it over and over again with every election since the founding of this country.
Total government spending at all levels is equal to around 40% of the total economy. This is a truly massive number. But the money doesn't go into a black hole vortex that many conservatives like to portray. It pays for the services and handouts that we sanction as voters.
When Avian flu breakout of 2004 resulted in a flock cull of around 14 million chickens in B.C., we the taxpayers ponied up about $70 million ($5 a bird) to the farmers as compensation. Mere weeks later barns were full again, raising chickens which are sold at bloated monopoly prices to clueless consumers who are hardly aware they're paying twice as much for chicken than Americans. Are farmers not aware that disease spreads quickly in condensed flocks of chickens and this is just a cost of doing business? Could they have reduced the spread of disease by taking better biosecurity measures? Sure, but who cares when the taxpayer will bail you out.
The BSE (mad cow) outbreaks in the beef industry a decade back also saw farmers bailed out by taxpayers. The various schemes added up to more than $500 million in handouts to beef farmers. This is despite beef farmers being well aware of the risks of farming and many not taking the necessary precautions to close herds and implement good biosecurity measures which reduce the spread of disease.
I like to pick on farmers since they form some of the most effective lobbying groups in the country for bailouts and privileges at taxpayer's expense, but this really expands to all of our society and goes well beyond just businesses.
When the Highwood and Bow Rivers destroyed homes that individuals purchased, knowing full well they were in a flood plain and thereby at risk, insurance naturally didn't cover most of the damages. But not to worry, the government bailed out the negligent, risk-taking homeowners to the tune of $100 million in taxpayers money. Often for high-end properties. Chances are if the government declined to bail out these homeowners, people in the future would think twice about living in a flood plain.
If you decide to jump on a motorcycle, drive at reckless speeds, and end up in a serious collision, again the taxpayer foots the bill for your stupidity. The cost of police to attend and investigate, the ambulance to take you to the hospital, the emergency doctors and nurses, your care in the Intensive Care Unit, your care in recovery, rehabilitation costs, medications, and so on. Often to the tune of hundreds of thousands of dollars. If our country instead made you pony up the cash, later sued you for costs, or you were simply left to die (cold, I know), I bet there would be fewer collisions as a result of purely reckless behaviour. In any event, it would cost me, a more cautious individual, less money in taxes which drag our economy down.
But... this is the government representatives and their policies that we the people have voted for. I use some big examples, but every day you can tune into CBC or Global and find a story about how some individual or business wants to be bailed out or have certain costs covered by the government (read: taxpayer) in one form or another. More often than not with some public pressure and relentless whining the money flows their way.
Back To Small Businesses
The reason why I bring all this up is mainly due to the pathetic arguments raised by the small business groups to justify the continuation of the tax benefits they currently enjoy. Business owners take risks, they create jobs, and they don't get pensions and benefits that the commoners get so they deserve big tax breaks instead, right?
The truth is that in our hand out, paternalist, we're there for you country, these arguments just don't hold water. Business owners already get big tax breaks on the true business end of things; these Trudeau changes affect the most successful business owners when it comes to the transition of business value to personal income. Again, this has nothing to do with their actual business operations.
The risks they apparently all take and the jobs they apparently all create are part of the business end of things. It's all in the name of profits. Don't go into business if you don't think you can make a profit by doing so that will adequately compensate you for your time and risk. If you're hiring employees, it should be for the sole purpose of achieving extra profits based on the output these employees provide. Profits should pay for these risks, taxpayers should not.
After all, business owners enjoy taxpayer funded healthcare for themselves and their families. They benefit from a country free from outside invasion paid for by taxpayers. They drive on the roads paid for by taxpayers. They go to the hockey rinks paid for by taxpayers. They will enjoy CPP and OAS and possibly even GIS when they're old – all paid for by taxpayers. Their kids go to school paid for by taxpayers. The colleges they attended and their children will attend are heavily subsidized by taxpayers. They get police, fire, and ambulance services paid by taxpayers. They watch fireworks on Canada Day paid for by taxpayers. They can ride buses subsidized by taxpayers. They drink the water subsidized by taxpayers. Their excrement flows down the sewers and into the treatment plants subsidized by taxpayers.
Every dollar that business owners save in personal taxes as a result of privilege built into tax codes is a dollar someone else has to pony up to pay for all this stuff. These costs of our benefits and hand outs are not paid for by money conjured up from thin air.
If you want real change and you want to pay lower taxes, then cast your votes accordingly in every election. But don't fool yourself into thinking that any major political party will save you money on taxes. Yes, this includes the Conservatives. And the Liberals. And the NDP.
The only federal government since World War 2 which achieved a very minor reduction in per capita spending was the Chretien Liberals. The provincial governments don't fare any better with the early Ralph Klein years in Alberta being the only material spending reduction seen in decades in any province.
For the most part, governments spend more resulting in more taxation because the voting citizens want more hand outs. I've never heard of a candidate for any party getting elected by standing up in those TV debates and seriously promising less health care benefits, less social payments to seniors, cutting police services, selling the fire trucks and ambulances and canning the firefighters, more expensive college tuition, etc.
The only party calling for a real decrease in hand outs, which translates to less spending and a lot less tax, is the Libertarian Party of Canada. Do you know how many votes they got last election? A whopping 36,000 votes, or just 0.2% of the total votes cast. That's about the number of people living in Moose Jaw, Saskatchewan. (Where is that again?)
It's pretty safe to say that Canadians love their hand outs and social benefits. This costs money. Time to pony up like the rest of us, business owners.
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