Although the subject of the Liberal Government's contemplated “tax fairness” measures continues to dominate much of the discussion I am hearing both here in the riding and in Ottawa, it is important to not overlook the previous Conservative Government's “fairness” debate during the last Parliament.
Many may forget however, formerly both the federal public sector pension plans as well as the MP pension plan contributions were heavily subsidized by taxpayers. In a measure of pension plan fairness to taxpayers, former Prime Minister Stephen Harper made changes so that contributions to these respective pension plans would eventually become equally split at 50/50 between employees and the employer.
Those changes were estimated to save taxpayers $2.6 Billion over a five period and are now fully in effect for 2017.
One aspect of these changes was not widely reported. The former Prime Minister also removed a special pension clause reserved exclusively for Prime Minister's. Removing this clause alone cost Mr. Harper in excess of $1 Million in future pension benefits that his predecessors still receive.
I mention this for the fact that it was revealed this week in the House of Commons that the Liberal tax changes, if implemented, will not adversely impact the personal family fortunes of either Prime Minister Trudeau or Finance Minister Morneau.
This revelation has created a significant amount of controversy, for good reason.
When millionaire families, being the real one percent of wealth, are not being impacted by “tax fairness” at the expense of small business owners, farmers, ranchers and other professionals – is that really fair?
Many small business owners and others I am hearing from strongly disagree. Ironically I am also hearing from a growing number of Liberal MP's in Ottawa who are also voicing concerns on the long term consequences this tax increase may create.
I will be in Penticton to hear your concerns about how these tax changes will impact your small business or profession this Friday September, 29th from 5pm to 7pm at the Day’s Inn and Conference Centre located at 152 Riverside Drive.
If you are unable to attend you can also email the Finance Minister at firstname.lastname@example.org to share your concerns. Please consider cc’ing my office.
My question this week relates to tax fairness.
Considering many of Canada’s wealthiest will still have access to tax mitigation strategies not impacted by these proposed tax changes, does that meet your definition of tax fairness?
I can be reached at Dan.Albas@parl.gc.ca or call toll free at 1-800-665-8711.
Tax fairness or tax increase?
I am going to begin this week by crediting a few backbench members of the Liberal caucus in Ottawa. A few of these MP's have been quietly voicing displeasure with the Liberals attempts to frame a proposed tax increase on small business owners and other professionals such as doctors, as being all about “tax fairness” when in reality it is simply a tax increase. These Liberal MP's have no doubt received the same types of emails that I have been getting from accountants, who consistently provide data that the Prime Ministers claims on taxes paid by small business owners and others are patently false.
So what is really going on here?
Earlier this week, the Department of Finance revealed that the actual deficit from the 2016-2017 fiscal periods was just under $18 billion. The good news for the Liberal Government is the forecasted deficit was $23 billion. The bad news for the Prime Minister is that he promised a deficit of $10 Billion and has still has not announced when or how we will return to a balanced budget.
Fair to say, it will not be in the year 2019 as was also promised by the Liberals.
Looking closer at the deficit of roughly $18 billion, two items stand out.
$3.7 billion in budgeted spending did not yet make it out of Ottawa. There are many reasons for this and it is not uncommon for any Federal Government to see delays in spending commitments.
The other interesting aspect of this budget deficit was that the forecasted income tax revenues actually dropped by just over $1 billion. As you may recall, the Prime Minister increased income tax rates on those who earn in excess of $200,000 and they now pay a personal income tax rate of 33%. As a result of this tax increase the Liberals had predicted income tax revenue would increase by close to $3 billion.
So, the Liberals need to increase revenue to pay for their increased spending, and seeing as it has not been realized by income tax increases, the intent now is to go after those who are personally incorporated.
The challenge is, the truly wealthy, those who can take stock options at a 50% reduced tax rate, are not being targeted at all by these Liberal proposed tax fairness changes. Instead, small business owners, the majority of which are not among the 1% of Canada’s most wealthy, are being targeted along with some upper middle income professionals such as Doctors.
Farmers, Fisherman and other unique groups also are being targeted and impacted by these Liberal tax proposals.
The Liberals continue to insist the tax fairness changes will not hurt small business owners and other professional groups in the usual “Ottawa knows best” tone.
Here is the problem.
Ottawa bureaucrats, majority of whom have never owned or run a business, when attempting to tell small business owners how an Ottawa imposed tax increase will impact them, tend to offend.
I know this because I hear from many of these offended entrepreneurs, every single day.
Worse is the Liberals have yet to explain how Ottawa bureaucrats will make arbitrary decisions on how family members of a small business may or may not be able to be paid.
Does a stay at home parent raising children and doing the books of a small business qualify to be paid?
We don’t know.
How many more Ottawa bureaucrats will need to be hired to administer these complex changes and at what cost?
Again, the Liberals will not say.
Ultimately this issue is not about tax fairness, it is all about a tax increase and I congratulate those Liberal MP's who are admitting as much.
What is your opinion – Do you view these tax changes as tax fairness or a tax increase?
I can be reached at Dan.Albas@parl.gc.ca or call 1-800-665-8711.
Two ears for listening
The proposed tax changes being contemplated by the Trudeau Liberal Government remain the single largest concern that I am hearing about on a daily basis.
Although I have heard some support for these potential tax increases the overwhelming response to date has been very strongly opposed. I have also heard some very specific concerns from a number of local accountants.
When the Prime Minister was in Kelowna last week, he stated that “people who make $50,000 should not pay more taxes than people who make $250,000”.
I believe most would agree with that statement.
Unfortunately, as many accountants have taken the time to share with me, this statement from the Prime Minister is not even remotely true or even close to being accurate.
In reality a small business owner, doctor or other person would indeed be paying tens of thousands more than one who earns $50,000 per year.
This is one of the reasons why there is such a large amount of outrage from many small business owners who feel that the Prime Minister either does not understand the impacts of our existing tax laws or is intentionally misstating them in an effort to draw public support for the proposed tax increases.
From my perspective, I will grant the Prime Minister the benefit of the doubt and assume he misspoke with this comment as can inadvertently occur with any elected official. For the record I will continue to oppose these tax changes in Ottawa and encourage the Liberal Government to be more transparent with their talking points.
For an update on another matter I have raised in a previous reports.
Some of you may recall I have mentioned that the federal agency responsible for regulating banks and other financial institutions has issued new enforcement regulations that issue a blanket prohibition on the use of terms like “bank”, “banker”, and “banking” by basically any entity other than the big banks. Credit unions, who have traditionally been allowed to use these common terms would no longer be allowed to do so. This would not only create consumer confusion it would also impose more costs and regulatory compliance burdens on Credit Unions that in turn would be passed onto Credit Union members.
Suffice to say these proposed restrictions also generated overwhelming public opposition throughout our region as well as many other regions across Canada. As a result the Financial Regulator has temporarily suspended this enforcement action while it begins a series of consultations.
I believe this should be taken a step further.
Currently I am working on a bill that would amend the Bank Act to make it clear that Credit Unions can continue to use terms such as “bank”, “banker”, and “banking” without fear of The Office of the Superintendent of Financial Institutions (OSFI) coming after them. I had hoped the Liberal Government would introduce similar legislation but in the absence of any my only recourse would be this private members bill.
My question this week – Would you support a Private Members Bill to amend the Bank Act and allow Credit Unions the continued use of terms such as such as “bank”, “banker”, and “banking”?
I can be reached at Dan.Albas@parl.gc.ca or call toll free 1-800-665-8711
Mr. Prime Minister,
I would like welcome you and the Liberal caucus to Kelowna.
I trust your caucus retreat will be constructive and I hope you have some time to visit some of our nearby amenities and attractions.
I also hope you will have the opportunity to meet with local small business owners and I will explain why.
During my time in office as a Member of Parliament, I have not encountered any single issue that has more angered small business owners than the current tax proposals you are contemplating.
I believe it is important you understand why this anger exists.
You might recall during the last election, your Liberal platform promised to, and I quote directly; “reduce the small business tax rate to 9 percent from 11 percent”.
Flash forward to today and not only have you reneged on this promise but many small business owners feel that you have labelled them as tax cheats.
Your Liberal Government is implying that the amount of tax they pay is unfair and paying more tax to Ottawa will create fairness for those who are not self-employed.
Many small business owners find this offensive from a Government who promised something very different during election time.
Throughout this discussion I have repeatedly heard your Finance Minister talk about “misinformation” as if to imply that somehow small business owners do not understand what paying more in taxes really means.
This also offends many small business owners.
On the topic of misinformation, it is also very important to explain that when a small business owner pays themselves a wage, they do so at the exact same income tax rates that any other Canadian citizen does.
That is an important distinction.
In essence, the small business owner pays taxes twice.
The first time is when the small business owner pays tax on any profit, assuming there is some. All small businesses pay lower taxes on business income than personal income taxes. However don't overlook that all net income, once paid out in wages, is taxed again at the same personal income rates as all other Canadians.
It is also important to keep in mind that a small business owner has no Employment Insurance, no Canada Pension Plan, no taxpayer financed public sector pension or related benefits, no maternity leave benefits and no formal vacation pay system.
All of these expenses must be covered by the small business profits, again assuming there are some.
I mention all of these things to hopefully better illustrate why so many small business owners are taking such strong opposition to your proposed changes.
As I believe it is important to propose and not just oppose, I would like to offer a few observations.
Canadians understand we must live within our means.
Likewise, Canadians also understand your Liberal Government is running significantly larger deficits than promised and currently has no plan to return to the promised 2019 date for balanced budgets.
Canadians further understand either spending has to be reduced or taxes increased to pay for all of your spending.
Your Liberal Government has clearly decided increasing taxes is the solution. Rather than demonize small business owners under the guise of tax fairness, why not at least admit that your Liberal proposal is a tax increase? Recognize that small business owners are being asked to pay for this heavy burden.
Mr. Prime Minister, you often talk of recognition and respect and in my view it is time for you to show some for Canada’s small business owners.
Here's my question for Canadians:
What are your thoughts on raising small business taxes?
I can be reached at email@example.com or by calling 1-800-665-8711
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Dan Albas is the Member of Parliament for the riding of Central Okanagan-Similkameen-Nicola.
Central Okanagan – Similkameen – Nicola