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Foothills MP: Liberal tax reform will kill business, family farms

john barlow

Foothills MP John Barlow was at Fort Macleod Library on Friday morning for a presentation about proposed income tax reforms.

Foothills MP John Barlow said Friday the tax reforms proposed by the Liberal government will kill family farms.
Barlow also said the reforms the government plans to implement on Jan. 1 unfairly target small business and will deter investment in the Canadian economy.
“They’re talking about going after the wealthy,” Barlow said. “But the very people they’re professing to help are the ones they’re hurting.”
Barlow said the wealthiest Canadians are already in the highest tax bracket and “will not pay another dime” under the proposed tax reforms.
The tax reforms are the work of the bureaucracy in Ottawa, which wants to generate another $3-billion in revenue, said Barlow, who was at Fort Macleod Library on Friday morning for a presentation to Chamber of Commerce members and the public.
“I’m hoping they (Liberals) will take a look at this and say it’s wrong,” Barlow said.
Barlow said when the last major tax reforms were implemented in the early 1980s it took two years of consultation and discussion.
The Liberals allowed just 75 days for consultation this time around, with some of the reforms retroactive to July 18.
Barlow pointed out 98 per cent of Canadian businesses can be classified as “small business,” and they employ more than 70 per cent of Canadians.
That means the impact of the tax reforms is going to be felt beyond the owners, who will see their tax rate jump from 50 to 73 per cent and will cut staff in order to stay afloat in the new tax regime.
“The other thing is if somebody is thinking about starting a small business, or has a small business and is looking at expanding, they may change their mind,” Barlow said. “Not only is it going to impact jobs right now, it could very well impact future jobs.”
Barlow cited Canadian Federation of Independent Business statistics that show two thirds of small business owners earn less than $73,000 a year, and half of that group earns less than $33,000 a year.
Barlow said the Liberal government is aiming to punish Canadians for success in business.
Yet the tax reforms will not impact Prime Minister Justin Trudeau’s family trust, or Finance Minister Bill Morneau’s company.
The three prime areas targeted by the Liberals are income sprinking, passive income and capital gains conversions.
At present family run businesses and farms are able to “sprinkle” income among family members who pitch in.
The government plans to implement a “reasonableness” test to determine if family members are earning their income.
The Conservatives argue this will mean higher compliance costs and government intrusion into small businesses and family farms.
Big businesses, like those owned by Morneau, will not face the same burden.
At present businesses can save money, or keep “passive income” within their companies for emergencies, economic downturns and retirement. Those earnings are taxed at withdrawal at the full marginal rate.
The government wants to tax small business owners twice on their passive income — once inside the company and once when it’s paid out to the owner for a tax rate as high as 73 per cent.
Again, the same burden won‘t be placed on big businesses like Morneau’s. Banks, multi national companies and publicly traded corporations will pay just 55 per cent tax.
The third key change targets capital gains conversions.
“This is the one that really impacts farmers and small businesses,” Barlow said.
At present small businesses that sell assets have the proceeds taxed at the capital gains rate, rather than the higher dividend rate.
Business owners and farmers will be prevented from using their lifetime capital gains exemption when selling to family.
Barlow pointed out a farmer would pay close to 50 per cent on the sale of his farm to a son or daughter, but would pay no tax if he sold to the Hutterian Brethren or a corporation.
Barlow said small business owners and farmers are not tax cheats. Instead they are hard-working people following the rules.
“We need to be very clear,” Barlow said. “These are very legal tax tools and strategies that have been in place for decades, and they were put in place to encourage Canadians to start small businesses.”
“We want to ensure that when you take that financial risk, we try and mitigate that financial risk as best we can to help you grow and be successful.”
Barlow urged Fort Macleod residents to phone Liberal MPs to pressure them to not proceed with the tax reforms, and visit the Web sites www.saveourbusiness.ca and www.saveourfarms.ca.

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