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A mandatory stop for any NDP politician visiting Sudbury, Ont., is the city's iconic nickel operations.

Instead, New Democratic Party Leader Thomas Mulcair visited Canada's nickel capital last week and headed to an outdoor store, where he touted the NDP's plan to slash the small-business tax rate.

The tax break – first announced last January and matched by the Conservative government in its April budget – is a key part of the NDP's bid to move from opposition to government in the federal election.

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But the play for small-business owners marks a potentially awkward policy pivot for a party with deep roots in the industrial labour movement.

Small-business tax breaks may be good politics. It's a lot less clear it's good economic policy, particularly with the country mired in a manufacturing export slump.

"Small-business owners are the backbone of this community," Mr. Mulcair said. "By providing immediate and reliable help to small-business owners, we can create local jobs here in Sudbury and help middle-class families get ahead."

There are several problems with the move by both the NDP and the Conservatives to cut the tax rate to 9 per cent from 11 per cent. It's expensive (up to $1.2-billion a year in foregone revenue), risks creating a disincentive for companies to grow and may disproportionately benefit some of Canada's wealthiest taxpayers.

Mr. Mulcair and Prime Minister Stephen Harper love to cast small businesses as hard-working job creation machines. And many are.

Sometimes they're just a tax dodge. Many high-income individuals funnel income through so-called Canadian-controlled private companies to avoid paying higher personal tax rates.

The small-business tax rate is already generous at 11 per cent on the first $500,000 of income, and it will be an even more attractive tax shelter at 9 per cent.

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"Many high-income individuals, using various provisions of the Income Tax Act, arrange to receive their income indirectly in private corporations," according to a 2014 study by economists Michael Wolfson of the University of Ottawa, Mike Veall of McMaster University and Neil Brooks of York University.

This may exacerbate income inequality because it allows individuals to lower their tax rate, defer income and even split income with lower-earning family members, according to the study.

Research by Jack Mintz, director of the University of Calgary's School of Public Policy, has found that the majority of those using the small-business deduction are taxpayers earning more than $150,000 a year.

Inequality isn't the only reason to be leery of another cut in the small-business rate. Compared to larger companies, small businesses already benefit from preferential breaks on research and development, employment-insurance rates and capital gains.

The growing tax gap between small businesses and larger ones discriminates against the kinds of companies Canada needs to drive the sputtering economy. Larger companies are more productive, pay higher wages, spend more on R&D and are more likely to export.

Ottawa would be better to lower the overall federal business tax rate, now at 15 per cent, rather than gumming up the tax system with a targeted break that's unlikely to get companies to grow and hire.

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By showering billions of dollars a year on small businesses, Ottawa will have less to spend on everything else – including direct assistance for manufacturers and exporters, infrastructure, job training or child care.

Instead, Mr. Mulcair, like the Conservatives, seems intent on spending tax dollars to fix a problem that doesn't exist.

Compared with other countries, Canada has a massive and thriving small-business sector, with few barriers to entry.

Nearly 700,000 companies tap into the small-business exemption every year. Half or more of those are self-employed individuals, who will never create a single job. In some years, nearly as many small businesses fold as are created.

A tiny fraction of these companies are the fast-growing, export-oriented startups that are likely to drive the economy of the future.

If governments are serious about addressing the country's ailing export sector, they should abandon small-business myth-making and figure out how to foster more global champions.

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Get the policy right, and Mr. Mulcair could find that factory workers and business owners share a lot of common ground.

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