Guest Column: Tax system fairness should be the government’s end goal

By Medicine Hat News Opinon on September 23, 2017.

“There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.” — Donald Rumsfeld

Sometimes the most knowledgeable person in a room is the quietest. The converse is also true.

I am reminded of a recent dinner party where, if volume were an indicator of intelligence, we’d have been in the presence of profound wisdom. Sadly, wisdom had not been invited to this party. Someone loudly proclaimed that 9/11 was a government sponsored conspiracy. The twin towers had been rigged with bombs that blew up as the planes hit the buildings. Proof? The White House wasn’t hit.

It’s these kinds of ‘conversations’ that seem to pop up at so many social gatherings and on social media these days. Alternative facts and alternative realities are dropped on the table between the beer glasses and fries. The sheer lunacy of these stories leave most of us speechless. Some people, however, simply acquiesce and say, “Could be, I guess. I think I read that on Facebook the other day.” And the stories spread and truth gets buried under giant piles of cow poop. So, what do we know? What should we know?

These last two weeks I wanted to find out anything I could on the issue of the federal government’s attempts to close several loopholes available to some small businesses in Canada. I love small businesses. Everybody in Canada loves small businesses. Everyone respects those who take entrepreneurial risks, who have the courage to put their own funds behind new ideas. Everybody wants them to succeed. So why is Finance Minister Bill Morneau being so mean to small businesses? I wanted to know.

So I read articles of both pro and con writers, analyzed graphs and charts and waded through perversely complex financial reports. Eventually a little clarity began to show through the morass. I learned about incorporation, income sharing and ‘sprinkling’, passive investments of business income into stocks and real estate, and hiring accounting wizards to find ways to whittle away reported business income and thereby reduce taxes.

My impression after all of this is that the lower tax rates for small businesses, first introduced in the 1970s by Pierre Trudeau, were meant to incentivize and support small businesses, and to encourage their growth so they would create jobs. However, over time and with numerous tweaks to the tax system, the tax savings that should have allowed businesses to grow and to create jobs were too often hidden and sheltered using the methods mentioned above. Tax shelters for some often means higher taxes for others so there is an element of unfairness in the system. Fairness, I am led to believe, is the motivation for the proposed tax changes.

I also became aware of the uncomfortable matter of many small business owners being made to feel as if they were tax cheats. It is clear that these people have done nothing wrong. They simply and wisely took advantage of tax breaks offered them, as any wise business person should. The problem, of course, is that the tax system is overly complex and needs to be clarified and adjusted towards greater fairness with a minimum of pain.

I am writing this on Thursday, Sept. 21. Sadly, I will not be able to attend the town hall meeting on Friday hosted by our MP, Mr. Motz. Mr. Poillievre, the shadow finance minister, will also be there to address the proposed changes.

I hope many citizens did show up to learn more about the Conservatives’ view of the proposed changes. I’m assuming, of course, that Mr. Poillievre will deliver a decidedly negative one-sided perspective. I assume that truth in this matter, if it exists at all, will lie somewhere between the words of Mr. Morneau and Mr. Poillievre. Many of the facts will remain unknown, and all the shouting and whimpering will amount to little more than hot air. It might be best to quietly wait for more information before loudly complaining.

The wisest action all of us could take is to persistently demand that Mr. Morneau clearly explain what is wrong with the present law, how exactly it will be altered, and who will be affected by the change, and how.

Peter Mueller is a long-time resident of Medicine Hat who, in spite of all the evidence, continues to believe we can build a better world.