Finance Minister Charles Sousa introduced legislation Tuesday to stop large companies from claiming the employee health tax exemption so that more smaller companies can qualify.
"It's certainly a great first step to reducing taxes and making our businesses even more competitive," Sousa said.
If passed, the bill would increase the tax exemption threshold to $450,000 from $400,000, as well indexing it every five years to inflation.
Companies with a payroll over $5 million — like the big banks — would no longer be able to claim the exemption.
More than 60,000 employers would pay less tax, including 12,000 that wouldn't pay the health tax at all, Sousa said.
"This change would lead to increased savings for small employers, including small businesses, charities and not-for-profit organizations," he said.
"Small businesses would now save up to $8,775 per year, and that's almost a thousand dollars more than at the previous exemption level."
The changes would end up costing the provincial treasury about $5 million a year, because barring big business from claiming the exemption won't completely offset the lost revenue from raising the threshold, Sousa said.
If the bill passes, the legislation will take effect starting in January, he said.
It was among the measures the minority Liberals put in the May budget to ensure the New Democrats would support it and avoid an election.
It's just "one little piece" and Sousa could do more, said NDP Leader Andrea Horwath.
The government is doing nothing to close a "huge corporate tax loophole" scheduled to take effect in 2015 that will allow companies to write off over one-billion dollars in HST on their entertainment costs and other expenses, she said.
"They're getting the low-hanging fruit, but on the big issue like this new corporate tax hole about to open up, the government's completely on the wrong track," Horwath said.
Sousa said he's confident the Progressive Conservatives will support the legislation too, even though they rejected his budget in its entirety.
But the bill got a chilly reception from the Tories, who called it an "optical illusion."
The problems faced by small businesses are much bigger than the employee health tax, said Tory MPP Todd Smith.
Businesses are struggling with skyrocketing electricity costs, increases to Workplace Safety and Insurance Board premiums and mountains of red tape, he said. The Liberals are doing nothing to address it.
"It's a shell game where money is being moved around to try and make it appear as if they're actually creating jobs in the economy," he said in the legislature.
"They're unwilling to go far enough to take the decisive action that's needed to provide real tax relief for businesses in Ontario."