THE BLOG

Ontario's Corporate Tax Cut for Small Businesses Won't Help Them Create Jobs

Small businesses need immediate tax relief to reduce their payroll costs in order to absorb a rapidly rising minimum wage.

11/29/2017 13:40 EST | Updated 11/29/2017 13:48 EST
PeopleImages via Getty Images

Small businesses are the backbone of our communities: the stores, shops and services that bring main streets to life; the job creators that generate prosperity; the innovators who create new products, services and solutions.

Small businesses accounted for over 87 per cent of new private-sector jobs in the past decade.

Locally owned, independent businesses spend three times more money to support the local economy than comparable large corporate businesses. This creates a multiplier effect where money circulates within a local economy instead of being sucked out of a community.

The small business owners in your neighbourhood are more likely to hire local accountants and lawyers, contract with local advertising and marketing firms, purchase from other local businesses, and donate to local charities and community events.

These small businesses in Ontario, along with non-profits, charities, social enterprises — anyone with employees — face a 32-per-cent increase in their labour costs over the next two years. They need immediate tax relief to reduce their payroll costs in order to absorb a rapidly rising minimum wage, which I support.

Cutting corporate taxes only helps businesses maximize profits, even if they do that by cutting jobs.

Many small business owners believe in paying their workers a living wage — this is a philosophy I held in running my business as well. And small businesses want government to take a balanced approach to achieve this goal so they can afford to create more better-paying jobs.

The province's Financial Accountability Officer recently warned the steep increase in labour costs could lead to 50,000 job losses, while business groups predict even greater job losses as employers try to absorb the new wage costs.

The Ontario Liberal government's response? Reducing the corporate tax rate for small businesses from 4.5 to 3.5 per cent. The problem is that this won't help all small businesses create jobs because it won't lower labour costs or provide immediate cash-flow relief.

Cutting corporate taxes only helps businesses maximize profits, even if they do that by cutting jobs. It will not help small businesses with the immediate cash-flow crunch they face. It will force them to wait until they file their taxes to get any help and only helps those who make big profits. Nor will it benefit non-profits and charities with payroll and cash-flow challenges. Lower payroll taxes help businesses whether they make a profit or just break even.

The Canadian Federation of Independent Business, which represents more than 100,000 small businesses, said the Liberals' plan "won't offset the real impact of this (minimum-wage) legislation on Ontario's jobs and the economy."

More from HuffPost Canada:


The Green Party of Ontario knows we can make it easier for small business to pay a living wage and create jobs by lowering the payroll taxes they pay — regardless of whether they make a profit or not.

The Ontario government should increase the exemption level for the Employer Health Tax from $450,000 to $1,000,000 in payroll. This will make it less expensive to create new jobs, and provide the opportunity to increase the pay for existing jobs, before being taxed on those jobs.

Our balanced plan is a win for workers who deserve a living wage and small business owners who want to create more well-paying jobs, injecting more money into their local communities.

This could mean up to $20,000 in pre-tax savings for qualifying businesses, which would make a difference for both mom-and-pop shops as well as for start-ups looking to grow their business. It would help small businesses, non-profits, co-ops, social enterprises and charities who may not have the cash flow to manage a rapid increase in costs.

Getty Images

I support the planned increases in the minimum wage, and I would also like to see increases in social assistance rates to help the most vulnerable in Ontario.

Both will help put more money into local communities because lower-wage workers and people on social assistance, by necessity, spend most of their income on paying for the basics — rent, food, hydro. Earning more gives them more disposable income to spend with local businesses.

Small, locally owned businesses create more diversified, resilient and prosperous communities. The Ontario government needs to take immediate steps to lower the taxes small business pay to create jobs.

Also on HuffPost: