The Fraser Institute just released their study on the tax burden we face. The Canadian Consumer Tax Index 2017 finds the average Canadian family paid twice as much of their income in taxes (42.5 per cent) as they did for housing (22.1 per cent) last year. The annual study tracks the total tax bill of the average Canadian household from 1961 to 2016, and looks at both visible and hidden taxes that families pay to the federal, provincial and local governments, including on income, payroll, sales, property, health, fuel, alcohol and more.
Taxes have gone up 2006% since the 60s. Many of the taxes we pay today began as temporary measures. No matter where you reside in the western world, governments have found a way to spend those tax dollars. As the Fraser report points out, it is now our single largest expenditure. Our federal government is rarely held accountable for their missteps, inefficiency or spending on corporate welfare.
Now, Finance Minister Bill Morneau is looking to close current tax loopholes for income splitting for professionals as tax advantages for small and medium-sized business (SMB) owners. In the past, families have also taken advantage of the lifetime capital gains exemption (LCGE), which as of 2017 shelters up to $835,716 of capital gains on qualifying small-business corporation shares from tax. Good tax planning has seen the LCGE of each family member used to shelter gains on the family business.
The government has proposed to restrict this. Starting after 2017, capital gains realized by a family member can no longer be sheltered with the LCGE to the extent those gains accrued while the individual was a minor. Further, any capital gains accrued while the shares are held in a family trust, or gains subject to the “tax on split income” (TOSI), would not be eligible for shelter using the LCGE.
The government seems to have no clue what drives and motivates business owners to invest their own capital, borrow from family members or mortgage their home to start and make a business thrive. SMBs employ 85% of all Canadian workers. Fewer than 50% of new SMBs last five years. If owners are lucky enough to sell their business for a profit, why try to limit their ability to shelter some of that hard-won profit? A further tax grab, without the required reforms and lowering of personal income tax rates, at this time is simply unacceptable.
This Liberal government continues to spend above its means. They have no clear tax or expenditure strategy for the running of government. Tell Bill Morneau to find ways to fix government waste, to lower taxes and avoid attacking our job creators. They are the engine for growth, investment and our future economic prosperity. Let’s leave them be before we lose the very people who drive the economy.