Trudeau visits Port Coquitlam – The Tri-City News

Trudeau visits Port Coquitlam - The Tri-City News
Is Andrew Scheer really promising a tax cut of $50K for millionaires?
As part of our federal election coverage, CBC News is assessing the truthfulness and accuracy of statements made by politicians and their parties.

The Liberal campaign recently rolled out a new talking point and Trudeau has been keen to repeat it whenever the opportunity arises.

Mr. Sarai stepped down as the Liberals B.C. caucus chair last year after taking responsibility for inviting convicted attempted assassin Jaspal Atwal to events during Mr. Trudeaus controversial India trip. Mr. Atwals presence at the Mumbai event created a furor in Ottawa at the time, given that he was convicted of trying to kill an Indian cabinet minister in 1986. His invitation to a second gathering in Delhi during Mr. Trudeaus visit was rescinded after photos of him at the Mumbai event surfaced.

The Liberals are pushing the message that Conservative campaign promises would give some of the richest Canadians a major break on their tax bills.

Mr. Trudeau avoided saying whether the Liberal government would step in with the proposed values test as he leaves the door open to intervening on Quebecs Bill 21, the controversial law that restricts religious dress among some public servants. Bill 21 is now being challenged in Quebec Superior Court on questions of jurisdiction and broader constitutional principles.

The party even printed the message on a faux Tory election sign displayed during a news conference Wednesday morning.

Speaking to reporters Friday, the Liberal Leader doubled down on remarks he made about a potential Quebec values test during Thursday nights French-language debate. Last month, Quebec Premier François Legault outlined a list of demands for federal party leaders on the campaign trail, including a language and values test for potential immigrants in the province.

Odds of a minority government rise, Liberal chances drop as Bloc surges in polls

Trudeau also brought it up during both leaders' debates this week, drawing pointed rebukes from Conservative Leader Andrew Scheer.

Mr. Trudeau kicked off the final stretch of the Liberal Partys cross-country tour with a rally at a food court in downtown Ottawa Friday morning. Local candidates, war-room staff and supporters attended the rally, where Mr. Trudeau promised to see you on the flip slide after the Oct. 21 election.

"That's a lie," the Tory leader shot back in a heated exchange during the French-language debate Thursday night.

Mr. Trudeau made the remarks at Simon Fraser Universitys Surrey campus, where he also attacked the Conservative Partys platform, unveiled Friday. He said the Conservatives plan to bring forward billions of dollars in cuts to government spending echoes the actions of Ontario Premier Doug Ford.

Despite Scheer's protests, it's clear the line will be central to the Liberals' strategy in the final stretch of the campaign.

But while the claim makes for a memorable campaign message, the facts are far more complicated than the Liberals' version of them.

Asked what questions would be deemed inappropriate or whether a Liberal government would intervene if it feels the test goes too far, Mr. Trudeau said, Im not going to get into hypotheticals on this one. Its a Quebec responsibility to deliver their certificate of selection.

Last month, Scheer pledged to scrap a host of deeply polarizing tax changes for incorporated small businesses that were brought in by the Liberals in 2017 and 2018.

Scheer vowed to go after measures that target income sprinkling and put a cap on the value of "passive investments" a private corporation can hold before its access to the nine per cent small business tax rate starts to erode.

The changes provoked a political firestorm when they were floated by the Trudeau government. The Conservatives fiercely opposed them, as did some small business owners and organizations that advocate on their behalf, such as the Canadian Federation of Independent Business.

Federal Liberal Leader Justin Trudeau seen here in Surrey. B.C. on Oct. 11, 2019, said that it is within Quebecs responsibility to move forward on whatever criteria they want for that certificate selection.

Critics said the Liberals were attacking small businesses — collectively the biggest source of employment in Canada — and making it tougher for them to grow and save.

This copy is for your personal non-commercial use only. To order presentation-ready copies of Toronto Star content for distribution to colleagues, clients or customers, or inquire about permissions/licensing, please go to: www.TorontoStarReprints.com

The Liberals, however, argued they were cracking down on well-off Canadians using the advantageous tax structure of private corporations to shield income from taxation.

Trudeau's campaign says that rolling back the measures would amount to a "tax cut" for the wealthiest Canadians. While it's true that high-income earners undoubtedly would benefit from the Tory proposals, the reality is not so simple.

Income sprinkling is a tax strategy that diverts income to family members with lower personal tax rates. It allows a small business owner to avoid having their income taxed at a higher rate by splitting it up among family members who own shares in the corporation.

The campaign has seen one bizarre twist after another without any apparent impact on the polls — until now. This latest twist is a little retro. The Bloc Québécois, pronounced all but dead after 2011, has been reanimated and could significantly upend the election plans of the Liberals and Conservatives.

Before the changes made by the Trudeau government, income could be divided among family members who had no discernible role in a particular business. The Liberals imposed stringent conditions on how and why income could be split up within a family.

Since the beginning of this campaign, the Liberals had been favoured to win more seats than the Conservatives, regardless of which party was ahead in the national polling average. This was being driven in part by the party's enduring edge in Ontario — but it was Quebec that made the difference.

At the time the measures were floated, the government estimated they would affect about 45,000 private corporations across the country, or about 3 per cent of all small businesses.

Liberal support in Quebec has hovered around the 36 per cent mark the party hit in 2015. Because of the wide gap separating the Liberals from the other parties in Quebec, however, they could count on winning about 50 seats in the province, a net gain of 10 over the last election's results.

Meanwhile, a March 2018 analysis by the Parliamentary Budget Officer looked at what types of families would be affected, based on their total annual taxable income.

From a high of 166 seats in the national projection in the days following the French-language TVA debate, before the fallout from that contest was being registered in the polls, the Liberals have plummeted nearly 30 seats to 139. That puts them just two ahead of the Conservatives.

The report found that 26 per cent of families affected by the changes earned total taxable income of between $150,000 and $250,000 each year, while 46 per cent earned between $250,000 and $500,000 annually. A further 15 per cent of affected families brought in between $500,000 and $1 million in taxable income each year.

The PBO also noted that about 900 Canadian families making less than $100,000 annually would end up paying more income tax as a result of the Liberal government's tax changes.

But in the rural regions of Quebec and the francophone areas in and around Montreal, the Liberals had been banking on winning seats with relatively low shares of the vote, benefiting from a vote split between the Conservatives, Bloc and New Democrats.

Tammy Schirle, a professor of economics at Wilfrid Laurier University, said that Canadians who gained the most from income sprinkling tended to be in the top 10 per cent of income earners.

That has dropped the Liberals into the mid-30s in the seat projection for Quebec, nearly tied with the Bloc Québécois. The Conservatives also have slipped and appear to be on track to win around 10 seats in Quebec, down from the 12 they took in 2015.

There are scenarios which could see a family avoid upwards of $50,000 in income tax in any given year if the Liberal measures were rolled back. Whether those people actually qualify as "multi-millionaires" — as the Liberals imply in their messaging — depends on their individual circumstances.

In addition to re-introducing income sprinkling for some small business owners, the Conservatives also have said they would "repeal Trudeau's tax on small business investments."

Passive income is generated from interest earned on passive investments, which tend to be in stocks or bonds rather than, say, new equipment or land for a new factory that a small business might purchase.

The Liberals' changes mean that after a business starts earning more than $50,000 in passive income, a larger share of its regular income is subject to the general corporate tax rate of 15 per cent, rather than the more favourable small business tax rate of nine per cent.

A business would need $1 million in passive investments, earning at a modest 5 per cent rate of return, to reach that $50,000 threshold where the higher corporate rate kicks in.

The Department of Finance estimates that, as of 2015, only about 2.9 per cent of Canadian small businesses — about 50,000 of them — met that threshold. In fact, more than 80 per cent of small businesses in 2015 did not have any passive investments at all.

It should be noted that opponents of the Liberal measures have argued that the $50,000 passive income threshold was too low.

After all, $1 million in savings might not do much to help a business salt away money for a large capital purchase or plan for a rainy day.

Taken together, bringing back income sprinkling (as it existed before) and eliminating passive investment fairness measures would leave some small business owners paying considerably less in tax.

Is it an across the board "tax cut" of $50,000, as Trudeau puts it? No — but it would mean some multi-millionaire small business owners avoiding taxes in ways not available to most other Canadians.

Sources: It's time for Canada's small business owners to get ahead, Conservative Party of Canada; Archived – Backgrounder: Income Sprinkling Using Private Corporations, Department of Finance Canada; Backgrounder: Tax Fairness for the Middle Class and Opportunity for All Canadians, Department of Finance Canada; A week of tax promises that are more about politics than policy, CBC News; Key Small Business Statistics – January 2019, Government of Canada; Budget 2018, Government of Canada; Income Sprinkling Using Private Corporations, Parliamentary Budget Officer

Lucas Powers is a Toronto-based reporter and writer. He's reported for CBC News from across Canada. Have a story to tell? Email [email protected] any time.

To encourage thoughtful and respectful conversations, first and last names will appear with each submission to CBC/Radio-Canada's online communities (except in children and youth-oriented communities). Pseudonyms will no longer be permitted.

It is a priority for CBC to create a website that is accessible to all Canadians including people with visual, hearing, motor and cognitive challenges.