PM willing to improve small biz tax plan but won’t abandon in face of backlash

KELOWNA, B.C. — Justin Trudeau insisted Wednesday that his government won’t back down on a controversial plan to end tax provisions that it says give some wealthy small business owners an unfair advantage.

The prime minister delivered that message as he kicked off a Liberal caucus retreat, pre-empting backbenchers who’d come poised to press for changes to the tax plan after being inundated with complaints over the summer.

“I want to be clear,” Trudeau told the assembled MPs.

“People who make $50,000 a year should not pay higher taxes than people who make $250,000 a year.”

While he signalled a willingness to adjust the proposed tax changes, Trudeau was adamant that they won’t simply be abandoned in the face of a mounting backlash from doctors, lawyers, tax professionals, shopkeepers and others who’ve incorporated their small businesses in order to reduce their income tax bill.

“We are always open to better ways to fix that problem but we are going to fix that problem,” he said.

The backlash has been growing since mid-July, when Finance Minister Bill Morneau released a controversial, three-pronged plan to end tax provisions used by a growing number of small businesses, creating what he called an “unfair playing field.”

One change would restrict the ability of incorporated business owners to lower their tax rate by sprinkling income to family members in lower tax brackets, even if those family members do no work for the business. Another would limit the use of private corporations to make passive investments in things like stocks or real estate.

The third change would limit the ability to convert a corporation’s regular income into capital gains that are typically taxed at a lower rate.

Morneau insists the plan will affect only those who earn $150,000 or more and who still have money to shelter from tax after maxing out their RRSPs and tax-free savings accounts.

Morneau stressed Wednesday that the government is still consulting on the proposals and is prepared to make some adjustments to avoid any unintended consequences.

“We know that we need to get more information before we can actually come to conclusions,” he said.

However, he ruled out extending the Oct. 2 consultation deadline, as urged by Canadian Chamber of Commerce president Perrin Beatty.

Morneau did try to reassure the Canadian Medical Association, which has warned that the proposed changes would disproportionately impact young female doctors who rely on the tax measures to be able to afford to take maternity leave.

“We have a commitment to making sure that the work we do for Canada includes a focus on how we can have a really great performance for women in the economy, that we deal with issues around differences in pay, that we deal with differences in terms of how women can be successful,” Morneau said.

“So nothing we will do will in any way jeopardize that. We’ll look at all these measures to make sure they’re not in any way causing (a) challenge for women.”

Ginette Petitpas Taylor, the new health minister, said she intends to meet soon with CMA president Gigi Osler to discuss her concerns.

“No decisions have been made at this time,” she said. “We’re really open to listening.”

Behind the closed doors of the caucus retreat, MPs aired the concerns they’ve heard from their constituents about the reforms. Insiders said views were mixed, with some backbenchers wanting to ditch outright one or more of the proposed changes and others seeking only a few tweaks.

Stephen Fuhr, whose riding encompasses Kelowna, said he’s satisfied that the government is listening to its backbenchers.

“They’re absolutely open to hearing from all of us,” he said. “That’s our job to deliver the message and it’s their job to compile the data to come up with the best policy to serve all Canadians and I’m convinced that they’re doing that.”

Despite the firestorm around the proposed tax changes, the Liberal government is riding high in the polls and the economy is rebounding. Backbenchers report their constituents are relatively satisfied with the government’s performance as it approaches the mid-point of its four-year mandate.

But Trudeau urged Liberal MPs not to spend time patting themselves on the back over the government’s accomplishments so far, warning that there’s plenty of heavy lifting ahead.

“As we come up on the halfway mark of our mandate, I think it’s fair to take a moment to look back and consider all that we’ve been able to achieve so far,” he told the caucus.

After a brief pause, he added: “So, there, that was your moment … What we need to do now and every day is focus on the hard work that lies ahead.”

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