OTTAWA — Prime Minister Justin Trudeau sounded a defiant note Tuesday as he promised to press ahead with the Liberal government's controversial tax changes even as clear new evidence emerged to show a Canadian economy on the rebound.
The Finance Department says the federal government ran a smaller deficit than the $23 billion that was forecast in the spring budget, ending the 2016-17 fiscal year with an actual deficit of $17.8 billion.
Not surprisingly, Trudeau seized on the news as evidence of progress in the Liberal plan to grow the economy by helping middle class Canadians. And he stood firmly by contentious new tax rules for small businesses — changes he insisted are more about making the system fair than they are about generating revenue.
"We are moving forward to make the tax system fairer to stop the system that encourages wealthy Canadians to use private corporations to pay lower tax rates than the middle class," Trudeau told a news conference in Ottawa.
The proposed changes have sparked a revolt by doctors, farmers, small business owners and even some backbench Liberal MPs, who have spoken publicly about the complaints they have been hearing from their constituents.
Finance Minister Bill Morneau released the controversial, three-pronged plan in mid-July, including restrictions on the ability of business owners to lower their tax rate by sprinkling income to family members in lower tax brackets, even if those family members do no work for the business.
He also proposed limiting tech use of private corporations to make passive investments in things like stocks or real estate and limiting the ability to convert the regular income of a corporation into capital gains, which are typically taxed at a lower rate.
I think the Liberals are desperately trying to change the message on this.Tory Leader Andrew Scheer
Trudeau said he will take the feedback into account to make sure the proposed changes specifically target the wealthy, but will not be throwing the entire idea out the window.
"We are glad to hear people's questions and concerns to ensure that as we move forward — which we will — on changing the system ... we will ensure that we're doing it the right way," he said.
"We were pleased to see a tremendous amount of response to our consultation paper — people with concerns, some legitimate, some less so — and we are folding them into the proposal that we will put forward, which will make our tax system fairer."
Trudeau also suggested the promised legislation would be narrowly targeted, "so that hard-working, middle-class small businesses, hard-working, middle-class farmers, do not get penalized by a measure that is aimed at wealthy Canadians."
Conservative Leader Andrew Scheer wasn't buying it.
"I think the Liberals are desperately trying to change the message on this," Scheer said Tuesday.
"I think that this is nothing more than a cash grab that will hurt local businesses' ability to not only retain the workers that they already have, but to create new jobs in their community."
With files from Stephanie Levitz
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