The short answer, according to a number of reviews done by experts in economics, is ― no. The vast majority of small businesses do not make enough money to be affected at all by the proposed changes in federal taxation. Farmers should not suffer either. In fact, according to the conclusions of those experts, no one will suffer from the proposed changes ― unless we define "suffering" to include "being wealthy and not being able to continue to get wealthier with quite as many tax benefits at the expense of the rest of Canada's tax-payers."
One of the criticisms leveled at the proposed changes is that they don't go far enough to address inequity in taxation ― that some of the tax benefits that go only to the richest one percent or so of Canadians will remain in place. According to a paper by economist David Macdonald, referenced below, one of those benefits is the employee stock option deduction, which costs the government $740 million dollars annually and provides no real benefit "to anyone making less than $215,000 a year." Richard Cannings, Member of Parliament for South Okanagan-West Kootenay, stated in a recent column that eliminating that particular give-away is not in the government's plan, and that it should be ― along with "the huge issue of big corporations moving their profits to offshore tax havens, cheating Canadians of billions in tax dollars."
We have a little for the poor
Canada's current taxation regime contains a few provisions that help enable people with low incomes to survive; these are the "credit for basic personal amount," the age exemption, the refundable medical expense deduction, the working income tax credit, and the non-taxation of social assistance benefits.
And a lot for the rich
On the other hand, there are many income tax provisions that benefit higher income-earners disproportionately. These are sometimes referred to as "loopholes" but that makes the benefit to the rich sound accidental and unintentional; do we really think that benefitting the rich was not intended? Examples of provisions that benefit mainly the top income earners include capital loss carry-overs; dividend gross-up and tax credit; pension income splitting; the above-mentioned employee stock option deduction; "flow-through share deduction and mineral exploration tax credit," and a raft of others. These provisions are, essentially, money given by the government to the rich by refraining from taxing them for certain types of income, and enabling them to legally avoid paying income tax on other chunks of income by doing certain things ― things that only the rich can do, or that would not benefit the poor even if they tried to do them (such as pension-splitting).
The idea that enabling the rich to get richer by means of preferential taxation will benefit the Canadian economy as a whole is supported only by those dinosaurs of economic ideology who still claim that "trickle-down economics" really results in more wealth for all. But that idea has been debunked by a number of studies examining real-life results.
In 2015, five International Monetary Fund (IMF) staff members released a 39-page "discussion note" which included the following statements in its executive summary on page 4:
"Our analysis suggests that the income distribution itself matters for growth as well. Specifically, if the income share of the top 20 percent (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20 percent (the poor) is associated with higher GDP growth. The poor and the middle class matter the most for growth via a number of interrelated economic, social, and political channels."
Gross Domestic Product measures what?
References to GDP (Gross Domestic Product) may lead to questioning the value (or not) of GDP and the "growth" it tracks as a valid measure of a nation's well-being, and to thoughts of the measure used instead by Bhutan: "Gross National Happiness" ― a goal enshrined in that country's Constitution. Under Article 9, "Principles of State Policy," the second paragraph is: "The State shall strive to promote those conditions that will enable the pursuit of Gross National Happiness." Measures of GNH cited in Wikipedia include psychological well-being, health, time use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards.
Since Canada is not yet sufficiently advanced to have adopted a more accurate measure of national well-being than the crude and misleading GDP (which would have us believe that war, illness and injury, storm damage and other disasters are good things, because all of them increase GDP), we must still use GDP in assessing the effects of taxation schemes.
A new paper released on September 13, 2017, by "Canadians for Tax Fairness" and titled "Dispelling the Myths on Closing Private Corporations Tax Loopholes," examines the proposed changes and concludes that "some legitimate issues are being raised, but there is a lot of misinformation and also blatant falsehoods that are being circulated by opponents to these tax reforms." It goes on to make several statements clarifying the effects on the middle class, small businesses, family farms, job creators, and so on. It also concludes that it is not the proposed reforms that are unfair, but rather the current tax measures that constitute give-aways to the rich. As noted above, under the changes proposed, some of those are expected to remain in place.
Ranking Canada's 64 tax benefits
Another analysis by David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, was published in November of 2016, titled "Out of the Shadows: Shining a light on Canada's unequal distribution of federal tax expenditures." In this 58-page document, Macdonald analyzes Canada's 64 tax expenditures ― tax benefits ― by how "progressive" or "regressive" they are, and defines those terms. He also shows how much money each tax benefit, whether it benefits the poor or the rich, costs the government. According to Macdonald's analysis, the total cost to our government of the five most regressive benefits (those benefitting only higher-income people) amounts to several hundreds of millions of dollars each year at minimum, and into billions of dollars annually.
Is this article one-sided?
Readers may wonder why this article cites only material supportive of the proposed tax changes. The answer is simple; I have seen no credible material to convince me the proposals will actually cause hardship to any businesses or any individuals. There has been a lot of yammering of alarmist claims that are not backed up by evidence.
Readers, if it turns out that the tax changes have resulted in impoverishing any struggling businesses, or any middle-class earners so that they are suddenly unable to live above the poverty line, I'll be very willing to report the cases and criticize the changes that led to those sad outcomes. But not if the changes just result in reducing the tax advantages available to individuals whose annual income exceeds $150,000. No tears there.
It's really about survival in the long term
To lower the rate at which we are damaging our life-support systems on this planet, we need to embrace the goal of sufficiency, instead of striving for excess. We need to begin admiring those who live modestly instead of despising them. People with the smallest carbon footprints should be among our heroes.
Removing some unfair tax privileges from the richest segments of society to reduce inequity would be a small but important start. It would signal that achieving excessive wealth and increasing the wealth gap are goals no longer supported as strongly by our government.
Cartoon image from "The Story of Stuff."