Thursday, 26 July 2012

CFIB on Manitoba's "oppressive small business taxes"

In a prior post I mused whether self-proclaimed champion of hard-working blue collar Manitobans and small businesses Brian Pallister was going to bemoan Manitoba's unfair small business corporate tax rate. That tax rate, of course, is zero percent.

Manitoba's ZERO PERCENT small business tax rate.

Constructed by the Analyst based on figures from
Revenue  Canada


Now, one anonymous commenter countered with this:

Nice try on the corporate tax rates. It would paint a clearer picture if you included ALL required rates and remittances. The small business tax rate elimination is minor when compared against payroll tax and paid up capital tax. When you factor in these charges, Manitoba becomes uncompetitive really, really fast.

The commenter failed to provide a list of all relevant remittances, state the various rates of other government-induced costs in Manitoba, or provide any figures. If someone has constructed a graph showing the effective tax burden on small businesses in this province, then I'll gladly post it in an upcoming post after checking all the facts. Please sent your submissions by email to sensibleleft@hotmail.com.

Now, the commenter included the corporation capital tax, but that's been eliminated for all corporations except crown and financial corporations for a good year and a half. What are some of the analogous neighbouring districts that are attracting businesses away from Manitoba?

Some small-c conservative bloggers in this province claim Saskatchewan. The entire economic boom in our neighbour to the west, they keep saying, is thanks mostly to supply side tax changes that Manitoba could use to grow its economy. But the Canadian Federation of Independent Business - the lobbyists who assert that they represent the interests of small business - claim that Saskatchewan needs to follow Manitoba's lead to remain competitive.

Something special is happening for entrepreneurs in Manitoba. On December 1, Manitoba will become the first province in Canada to have a zero per cent small business tax rate. The government of Saskatchewan should follow suit.

The province of Saskatchewan cannot ignore the fact that we are home to the highest small business tax rate in Western Canada with Manitoba eliminating its small business tax rate on December 1 and British Columbia's plan to eliminate its small business tax rate on April 1, 2012.

To keep Saskatchewan competitive, CFIB recommends the upcoming 2011-12 provincal budget include a multi-year plan to eliminate Saskatchewan's small business corporate income tax rate.

("Manitoba small business tax rate falls to zero - Saskatchewan should follow". Canadian Federation of Independent Business)

Now, there's two ways to take this. Either Manitoba's small business tax reductions are so significant they actually threaten the competitiveness of Saskatchewan or CFIB is just using scare tactics in anti-tax propaganda directed at Saskatchewan policymakers. In a larger CFIB press release, it's stated that small businesses still pay a "host of taxes and contribute to the functioning of the government", so it looks like they're trying to spin this both ways.

Manitoba Public Insurance: According to a Consumers'
Association of Canada study
,
Manitobans pay some of the lowest auto rates
in the nation.

Image Source: MPI website
I certainly dislike the idea that small businesses are synonymous with entrepreneurship, especially given  that Canada's productivity lag with the US has been pinned on unincorporated businesses. I'm sceptical of treating this press release as too much more than yet another contradiction in the "less corporate tax at any cost" crowd's messaging.

The fact still remains, though, that the upper corporate tax rate and personal income tax rates are very high in this province. But Manitobans in the bottom 40% receive more government transfers than they pay in income taxes. Of course, there's still the burden of regressive provincial sales taxes, less progressive property taxes, and user-fees, but Manitoba's progressive personal income tax system still smoothes the rougher, inegalitarian edges of the market distribution.

Market vs After Tax income of Manitobans in various
fifths of the income distribution (from bottom/lowest fight to top/highest
fifth).

Image Source: Ian Hudson/PolicyFix 
 Many services, such as Auto Insurance, are much cheaper in Manitoba thanks to tax financed provincial involvement and crown corporations (given the economies of scale they entail) - certainly adding some positives on the other side of the "cost of doing business" ledger.

Then, of course, there are all the deductions that lead to a lower effective tax rates compared to the statutory tax rates.

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12 comments:

  1. An Anonymous poster, huh? Yes, I suppose I could do your work for you, but..... If you are doing a blog post and you want to be taken seriously you should try to present all the facts rather than your selective pro-provincial NDP stance.

    Elimination of paid up capital tax? It should never exist in the 1st place.

    Small business tax? Window dressing. Go look at the rate and exemption - while the NDP can champion its elimination, it's of no real consequence because of how marginal it is. The killer is the Payroll tax. That's why no head offices locate here. That's why a business in MB pays more corporate tax than any province west of Ontario if they make more than $500K in before tax income. Do we get that much more than any other province? Maybe if you think that funneling money to union organizers is good, but most would disagree.

    Your justification for low personal tax exemptions and high low end personal income tax with "But Manitobans in the bottom 40% receive more government transfers than they pay in income taxes. " is absolutely laughable. If you read the article, it refers to ALL levels of gov't. But you're pretty good at cherry picking aren't you. So if there are federal gov't transfers coming in, it's okay to tax the low income at a high rate, huh?

    And MPI? Yeah,it's cheaper alright - cheaper if you are a bad driver. In fact a strong argument could be made that because we have public insurance that allows for a driver to rack up 15 demerits ( while in another province the cost would be prohibitive, if they would be allowed a license at all), the societal cost of having more bad drivers on the road in MB is greater than other provinces.

    I'm done with commenting on your blog, but perhaps you can answer one last question:

    Is your paycheque on NDP party orange, or are you one of those redundant civil servants whose is convinced that their redundant job would be eliminated if the NDP left power?

    ReplyDelete
    Replies
    1. "Yes, I suppose I could do your work for you, but..... If you are doing a blog post and you want to be taken seriously you should try to present all the facts rather than your selective pro-provincial NDP stance." - Riverman Jr.

      Yeah, that pro-provincial NDP slant just shines right out herehere, here, here, or here. Given the track record of badmouthing Today's NDP and Doerism, sincerely doubt that I could a paid position with the party if I tried.

      "Elimination of paid up capital tax? It should never exist in the 1st place." - Riverman Jr.

      Given you are the same anonymous commenter as the one from earlier, that's a nice flip-flop. First it was that the corporation capital tax just kills small businesses right now in this province, then it was that it "should never have existed".

      "Small business tax? Window dressing. Go look at the rate and exemption - while the NDP can champion its elimination, it's of no real consequence because of how marginal it is. The killer is the Payroll tax. That's why no head offices locate here. That's why a business in MB pays more corporate tax than any province west of Ontario if they make more than $500K in before tax income. Do we get that much more than any other province? Maybe if you think that funneling money to union organizers is good, but most would disagree." - Riverman Jr.

      Statutory tax rates aren't the only considerations businesses make when it comes to where to locate (if they were, Somalia would be a lot more desirable of a location than it really is). KPMG rates Winnipeg as the most competitive city in Western Canada to locate a business - are they part of a vast NDP conspiracy?http://www.kpmg.com/ca/en/issuesandinsights/articlespublications/press-releases/pages/competitive-alternatives-release-winnipeg.aspx

      Delete
    2. con't

      "Your justification for low personal tax exemptions and high low end personal income tax with "But Manitobans in the bottom 40% receive more government transfers than they pay in income taxes. " is absolutely laughable. If you read the article, it refers to ALL levels of gov't. But you're pretty good at cherry picking aren't you. So if there are federal gov't transfers coming in, it's okay to tax the low income at a high rate, huh?" - Riverman Jr

      Are you claiming that all transfers come from the Federal government? The federal government seems equalize income in Manitoba much more than other provinces.

      "The same is true for Manitoba. The average market income of the richest 20% of Manitobans is 19 times that of the poorest 20%. For after tax income, the ratio is a much more modest 7 times. So, examining only what we pay, as the Fraser Institute does, ignores the fact that the government uses some of what it takes to give back to families. Further, in its giving and taking, it creates a much more equal society. Unfortunately, it appears that this crucial role is being compromised and is not helped by editorials like those in the Free Press. One Statistics Canada study in 2009 found that after 1995, the tax and transfer system has become less redistributive, particularly due to changes in social assistance levels (2)." - Ian Hudson

      "MPI? Yeah,it's cheaper alright - cheaper if you are a bad driver. In fact a strong argument could be made that because we have public insurance that allows for a driver to rack up 15 demerits ( while in another province the cost would be prohibitive, if they would be allowed a license at all), the societal cost of having more bad drivers on the road in MB is greater than other provinces." - Riverman Jr.

      Do you have ANY evidence that MPI is only cheaper for poor drivers?

      "I'm done with commenting on your blog, but perhaps you can answer one last question:" - Riverman Jr

      Sure, have at it. I'm sure it won't be some lame attempt at an ad hominem.

      "Is your paycheque on NDP party orange, or are you one of those redundant civil servants whose is convinced that their redundant job would be eliminated if the NDP left power?" - Riverman Jr.

      Neither. Nice try, though.

      Delete
  2. Anal, I didn't post those comments above so stop using my name on them. Or perhaps you give me your full name and address so we can talk about this in person.

    ReplyDelete
    Replies
    1. Except, I'm not using "your" name. I've given the anonymous commenter the moniker of "Riverman Jr because they're offended at being referred to as an "anonymous poster". I in no way mean to insinuate that you and the other person are the same person, just that you and they share a similar worldview and similar debate tactics. If you like, given the especially accommodating mood I'm in, I could just refer to them as "junior" from now on.

      Delete
    2. That would be just fine. Ask your mom about libel.

      Delete
    3. I'd suggest you'd ask your mother, father, or guardian about libel given the comments you've made about politicians and bridge accidents in the past.

      Delete
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