Recent tax changes - harming the middle class

Our tax authorities under the direction of our federal bureaucrats have decided to adversely impact the middle class. Recently they tabled legislation that would eliminate the ability of owners/entrepreneurs to share profits with shareholders that are not actively engaged in the business and impose an additional tax on excess funds that remain in the corporation. These changes will significantly increase the tax burden of the owners/entrepreneurs of our small to medium size businesses. This will undoubtedly impact the ability for these owners/entrepreneurs to invest and grow their businesses. When business stagnates it falls behind – this will lead to reduced job opportunities and, you guessed it, a negative impact on our middle class.

The government ran on a platform of supporting the middle class yet they approve changes which will significantly impact the tax burden of owner/managers and entrepreneurs. It is mystifying that our bureaucrats do not see the direct connection between the success of our business owners and the success of the middle class. Who does our government think supports a significant portion of the middle class jobs? Large corporations and foreign businesses do not have the same connection and commitment to doing business in Canada as our Canadian residents/citizens that run small to medium size businesses do. These foreign entities and large corporations do not invest in our economy to the extent of our small to medium size businesses. Hitting these individuals with an additional tax burden is puzzling and, frankly, harmful to the middle class.

Owners/entrepreneurs make significant personal sacrifice in terms of hours invested, capital put at risk, and stability of their income. Their success in many cases is linked to the support they receive from families and friends who may not have a direct involvement in the daily operations of the business, but whose support allows the entrepreneurs to make the sacrifices required to start and run successful businesses. In particular, spouses/significant others make momentous sacrifices in terms of their employment and income to support their partners and families.

Owners/entrepreneurs have a history of reinvesting in Canadian businesses – reducing their ability to do so only hurts the prospects for our economy and the jobs these owners/entrepreneurs create.

Bryan Haralovich, CPA, CA, CPA (Illinois), is a Partner at Welch LLP in Ottawa. Click on Bryan's icon to arrange an interview.

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