Pushback on the proposed income tax changes increased in intensity, with the Canadian Medical Association launching broadsides at the policy under the rubric that it’s “sexist” and will drive doctors out of the country, while Conservatives have taken these arguments to social media, Lisa Raitt policing news aggregators and Kellie Leitch penning fundraising letters. Jane Philpott, addressing a CMA conference, assured them that they were operating under misinformation and that the goal of the changes was tax fairness – that those with spouses earning significantly less money or having adult children shouldn’t unfairly benefit from the existing system than those who don’t.
I did try to get some answers as to how this policy was “sexist,” because I’m not entirely convinced that these changes prevent people from using money in the corporation to finance parental leaves, never mind the fact that the previous government made a Very Big Deal about changing the EI system to allow self-employed people to contribute in order to finance maternity leaves – something that received very little uptake. And most of the stories that Raitt pointed to were anecdotal that didn’t point to where these policy changes were a problem – one example was a Facebook post where a dentist insisted that these current policies were what allowed her to keep up with male counterparts, which is an argument that makes no sense at all. They don’t prevent incorporation. They don’t prevent deductions of expenses or reinvestment in the business – it’s about not letting people use income sprinkling or splitting for the sole purposes of reducing their taxes. Not that it’s stopped the narratives that this hurts doctors or struggling small businesses.
Amazing trickle-down spin. This measure won't affect *anyone* earning $45k/yr, small biz owner or not
And this is a salient point – in Ontario, the provincial government encouraged this kind of incorporation rather than increase what they’re paying doctors, so you can see why they’re upset that these tools are being taken away from them. Nevertheless, it also largely proves that their arguments are fairly disingenuous, especially when they insist that “it’s not about the money.” But with none of their other arguments actually panning out, it seems to be that’s exactly what it is, and it’s fine if they come out and just say it. But to put on this song and dance about how the changes are “sexist” and that it somehow disproves Trudeau’s feminism, and ignoring the stated purpose of the changes with regards to tax fairness, makes the excuses start to ring fairly hollow.
The first round of NAFTA talks has ended without any firm conclusions in one way or another, which is to be expected. It is also noted that they were free from any public drama, but it’s still early days, so we’ll see how long that lasts, especically considering that we’re dealing with an Uncertainty Engine for a president in the United States. While the US is signalling that Buy America is a non-negotiable in NAFTA talks, the PMO has assembled a crack unit to deal with the fallout of a US walkout on talks, seeing as Trump already played his walkout card months ago so it gave them time to prepare.
Meanwhile, trouble with NAFTA talks could mean an economic slowdown, as there have already been some signs of slowdown in the manufacturing sector, and expectations that GDP growth could start to slow for the remainder of the year. That having been said, there’s also talk that if the Trump administration tries to simply tear up NAFTA, there are recourses that Congress has at its disposal that would essentially work to keep the existing agreement up and running by backdoor means, but it’s messy and complicated (and you can see Alex Panetta talking about that starting at 10:51 on this Sunday Scrum segment).
Another day, and more moaning about the proposed small business tax changes, which have now been equated to “class warfare”! Yes, a pair of tax lawyers wrote in the Financial Post yesterday about how the ability for small business owners to split their income with stay-at-home spouses was great policy because it was first proposed back in 1966. I kid you not. Fortunately, economist Kevin Milligan is back after a few days offline, and can help sort some of this out.
These TOSI rules already exist. You can't set up 'Potemkin shareholders' with your <18 kids who you pretend are working for the company. 2/
Government is not a business. It cannot be run like one, no matter how many times people like to chant it as a slogan. It fundamentally does not operate in the same way, nor can it ever run in even approximately the same way. The absolute fundamental principles do not translate because government has no bottom line. The sooner people grasp this, the sooner we may have more rational discussions on how to better operate government in a sane and rational manner.
Meanwhile, Andrew Coyne is unconvinced by all of the caterwauling about the proposed changes, not seeing the moral advantage that small businesspeople are apparently owed, and suggests instead that the incentives to incorporate be reduced by bringing the topline personal income tax rate and the small business rate closer together.
We want to encourage entrepreneurs and investment. But there is no reason to funnel that activity thru a specific tax-favoured corp form.
If there’s one thing that the federal government’s announced changes to small business tax rules for the purposes of closing tax avoidance loopholes has done, it’s stirred up a hornet’s nest of comments from the “Tax Bad! Hulk Smash!” crowd, who have come up with all manner of misleading talking points and crocodile tears, while interested parties (such as doctors and farmers) who have been using these loopholes to avoid paying taxes are crying poverty in the media, where there has been very little pushback from credible economists to these sob stories. Particularly galling are those who insist that the ability to engage in income splitting is somehow more virtuous because they’re small business owners, as though there hasn’t been a whole cohort of people who would love income splitting to allow their spouse to be a stay-at-home parent (which is a whole entire other public policy discussion about the value of women in the workforce).
And don't even get me started about the backwards view that a woman doesn't contribute to a family business if she just manages a household. https://t.co/vThXpwOacN
And lo and behold, Jason Kenney decided to try to get his kicks in despite the fact that it’s a federal issue and he’s currently running in the provincial sphere. The problem? That he’s offering a completely disingenuous position.
Alberta small businesses are struggling. But the federal Liberals want to raise their taxes. Why is the NDP silent on this federal tax grab? pic.twitter.com/eOzhr1TsGt
And that’s the rub – these changes aren’t affecting struggling small business owners. They’re not affecting their ability to keep the business liquid, or to save for retirement, because those haven’t been affected (as we recall, Kevin Milligan has explained this several times). And for the “Tax Bad! Hulk Smash!” crowd to try and cast these changes in such a manner is utterly ludicrous. It’s an attempt to paint the Liberals with a brush of being job killers and high taxers, which is not what these changes are about. It’s about ensuring that people don’t avoid paying taxes by virtue of these measures, so unless they’re keen to promote other forms of tax avoidance or evasion, trying to close loopholes shouldn’t be treated as an added burden to people who are doing well for themselves.
Tongues were set wagging in the Nation’s Capital yesterday when The New Yorker claimed that Justin Trudeau’s principle secretary, Gerald Butts, had struck up a friendship with Donald Trump’s chief strategist Steve Bannon, of Breitbart fame. Apparently, Bannon sees Butts as the left-wing version of himself, or something, and Butts allegedly told him that there’s nothing more populist than a rich guy raising taxes on the wealthy. And while everyone clamoured for some kind of confirmation out of PMO, getting non-denials from official sources, and “it’s just business” from the less official sources, none of the Canadian stories that I read stopped at the part where the New Yorker piece claimed that Trudeau reversed a polling slump by pushing through these tax measures. While I will readily admit that most polling stories give me hives, especially two years out from an election, I can’t for the life of me recall this having happened – Trudeau’s poll numbers have remained stubbornly high, and only really dipped a little when Andrew Scheer won the Conservative leadership, because at that point there was an actual face that people could put to the poll questions (never mind that questions related to which leader one would vote for are illegitimate given our system of government). Trudeau putting forward these tax changes were the first piece of legislation that they tabled, and while it took a while to actually pass (during which time a budget had also been tabled and passed), it had no actual effect on his polling numbers. Where the New Yorker got this particular tidbit is mystifying to me, and why Canadian outlets didn’t call bullshit on this – and subsequently look side-eye at the other claims in the piece – is similarly baffling.
Did they talk to Butts? If not, how do you know they are friends? This story is almost certainly utter crap. https://t.co/DI359Wuxji
Of course, the story would not be complete without Thomas Mulcair coming out to theatrically demand that Butts disavow this “friendship” given all of the drama around racism and white nationalism in the States over the past few days. The problem of course is that a) Butts is not an elected official, and b) there are NAFTA talks underway, and it would be really bad form for our government to so blatantly thumb our noses at the Americans in this way. Keeping a working relationship going would seem to be the most prudent course of action – but that never seem to be the course that Mulcair advocates.
Second, it is not the job of political staffers to 'disavow' political staffers in other countries. Full stop. https://t.co/EppMlgBmbR
We’re still talking NAFTA? Of course, we’re still talking NAFTA, as negotiations actually get underway today, so that’s exciting. If you need any more background (on top of what’s been said for the past several days) here’s a look at why Chrystia Freeland’s list of demands – especially around local procurement and labour mobility – might be a tough sell in the States, while the proposed chapters on gender and Indigenous issues are likely to be seen as simply expressions of the Trudeau government’s values. And while there aren’t any expectations that these negotiations will be easy, given that Trump is an Uncertainty Engine, trade experts are pointing out that Canada has more leverage than we think we do.
Meanwhile, Paul Wells had plenty to say about the past couple of days:
1. Some stuff lines up perfectly with Trump's rust-belt populism, such as "labour chapter." Some might line up in surprising ways, eg gender
The morning belonged to Chrystia Freeland yesterday, starting with her speech on NAFTA renegotiation at the University of Ottawa, followed by her appearance before the Commons trade committee to answer questions – however vaguely – about what the country’s priorities were. And while she did list ten things that Canada is looking for (compared the American wish list of 100 items), she didn’t bow to opposition pressure to negotiate in the media, or to lay out which of the items on that list were merely for show, whether that’s the proposed chapter on gender or Indigenous issues. It was driven home several times that yes, Supply Management is going to be defended (no matter how many times the different opposition parties have tried to play the game that only they truly love the system). And as for talk about things like harmonizing regulations – a constant promise that never seems to make much progress no matter which government is in power in either country – it has become clear that this is something that the government began doing their homework on since Trump began raising trade issues in the 2016 US election.
Meanwhile, Paul Wells evaluates Freeland’s deliberate vagueness in what she was trying to convey about the talks, while Andrew Coyne wonders if the Canadian government’s wishlist isn’t a deliberate attempt to sandbag the talks from the start, possibly in the hopes of keeping things status quo.
Starting this week, it looks like it’s going to be all NAFTA, all the time, as trade talks get underway. Chrystia Freeland is kicking things off with a speech in Ottawa today, urging support for an overhaul, before she goes before a parliamentary committee about the government’s priorities (which I’m sure there will be a certain amount of vagueness about because I’m sure she’s not looking to negotiate in the media). While Freeland and Justin Trudeau have been making noises about labour and environmental standards of late, the red line will likely remain a dispute resolution mechanism, given our disadvantages with American litigiousness and their compliant courts.
In light of these talks, here’s a look at how the benefits are often invisible to Canadians, how populism is affecting negotiations – particularly among the Americans, and how energy could be an area where NAFTA does a great deal of good – assuming that it gets to the table this time around. Here is a look at the lead US negotiator, and how various groups back here in Ottawa are lobbying the government ahead of negotiation. And no examination of the negotiations would be complete without a reminder of previous trade talks with the US, going as far back as pre-Confederation times.
Meanwhile, John Geddes sets the stage for the talks, while Andrew Coyne makes the point that Canada’s leverage in these talks is the ability to walk away, seeing as we survived without free trade for 120 years and we can do it again.
There’s been a great deal of concern trolling going on over the past few days when it comes to the planned changes to self-incorporation to close the tax loopholes found therein. Conservative leader Andrew Scheer tweeted out another of his disingenuous messages yesterday, talking about “hiking taxes” on doctors – who are leading the concern trolling charge against this closure of self-incorporation loopholes – which is not surprising, but nevertheless not exactly the truth about what is going on.
Keeping taxes low helps young people looking for their first job. Hiking taxes, especially on doctors, makes it harder on Canadian families. pic.twitter.com/QFra6WcSE1
One of the many challenges of Canadian democracy is our geography – especially the fact that we have so much of it. Rural and remote regions tend to have large riding boundaries, and that causes its own share of problems, particularly when you have a number or ridings larger than countries like France, and no, that’s not an exaggeration. Ontario has been in the process of redrawing their riding boundaries after the federal government did in advance of the last election – notable because Ontario largely follows the federal riding boundaries, but in the past, they split one of the giant Northern Ontario ridings into two for practical purposes. Under this new redistribution, it looks like they want to split it into four instead. Where this becomes problematic is not only the fact that it far exceeds the usual 25 percent variance in rep-by-pop weighting that the courts usually allow, but it’s being justified in giving votes to francophone and Indigenous communities in the area.
In the National Post, Chris Selley takes on this particular proposition, and makes a very good point in that we don’t have any particular basis in this country for awarding “superballots” to traditionally underserved communities as a means of reconciliation or redress. Add to that fact, that while the commission may talk a good game about better enfranchising these Indigenous communities, they traditionally have lower turnouts not only for lack of access by elections officials, but because in some of those communities, they resist taking part because they don’t see themselves as part of Canada, but as a sovereign nation within Canadian boundaries, and participating in Canadian elections would undermine that sovereignty. I’m not sure that “superballots” would change that particular consideration for them either, which could make the commission’s excuse for naught. Would that mean that in these newly created ridings that the non-Indigenous voters who do participate have their votes count that much more? Quite possibly. And while one does understand the frustration and challenges of an immense Northern riding, there are other ways to mitigate those issues, with greater allowances for offices, staff and travel considerations that the government should be ponying up for. I’m not sure that this new proposal is going to pass the Supreme Court of Canada’s smell test.