The Ontario and federal Liberals are discovering that, once lost, the love of small-business owners is tough to win back.
But they sure are trying.
Ontario Finance Minister Charles Sousa announced Tuesday in his fall fiscal update that the government will cut the small-business tax rate by a percentage point, to 3.5 per cent, on Jan. 1. It will also roll out $500-million in new programs for smaller companies.
It's no coincidence that this package of goodies comes as Ontario is poised to put in place the Fair Workplaces, Better Jobs Act (Bill 148), highlighted by a hike in the minimum wage to $15 an hour from $11.60, along with extensions to vacation, medical and parental leave. Business groups have warned that the legislation will put 185,000 jobs at risk.
Ontario's olive branch comes just weeks after the federal Liberals backtracked on efforts to close what they characterized as tax loopholes benefiting small-business owners. Last month, Finance Minister Bill Morneau abandoned or modified a series of planned tax changes after intense blowback from small-business groups. And as with Ontario, Ottawa recently announced it would lower the federal small-business tax rate to 9 per cent in 2019 from the current rate of 10.5 per cent.
British Columbia and Saskatchewan have also announced tax relief for small businesses in recent months.
Efforts to win back the support of a disgruntled constituency follow a surprising burst of activism in 2017 by shop owners, farmers, doctors and other small-business owners across Canada. The year will go down as the moment when small-business owners stood up and collectively declared: "We're as mad as hell and we're not going to take this any more."
They have signed petitions, bombarded their elected officials with grievances, lobbied, tweeted and banded together in new groups, such as the Coalition for Small Business Tax Fairness and the Keep Ontario Working Coalition.
Their ire is not just about the minimum-wage hike and arcane federal tax changes. They complain about a litany of federal and provincial measures since the last recession that are driving up costs and making them less competitive. The common list of gripes includes new carbon taxes, rising electricity bills, looming hikes to Canada Pension Plan contributions and a top federal-provincial tax rate for individuals that now exceeds 50 per cent in many provinces.
Wage costs, taxes and regulations routinely top the list of grievances among business owners, according to the Canadian Federation of Independent Business's monthly business barometer survey.
CFIB president Dan Kelly says he's out to debunk the widely held notion that "owning your own business is a licence to print money."
The CFIB has likewise complained that the government "doesn't understand how a small business works."
Trying to mollify the discontent is partly about politics. In both cases, the Liberals are facing challenges on both the left from the NDP and on the right from the Conservatives as they look ahead to facing voters. Their belated outreach to the business lobby suggests they may be feeling more intense pressure from that side of the political spectrum and are willing to spend money to win back their support.
It may also be an omen about the fate of the progressive economic policies championed by Prime Minister Justin Trudeau and Ontario Premier Kathleen Wynne.
Mr. Trudeau's and Ms. Wynne's rhetoric hasn't changed. But their recent attempts to appease the business community may be a tacit acknowledgment that they have moved as far as they dare on taxes, income inequality, climate change and labour rules.
Complicating their calculation is the uncertainty over where the United States is headed, under President Donald Trump, on taxes and climate policies.
The modest small-business tax rollbacks in Canada are a drop in the bucket compared with the massive corporate tax cuts being proposed by Republicans in Congress. It could leave Canada at a competitive disadvantage.
If the U.S. goes big on tax cuts, expect Canada's newly energized small-business lobby to dial up its outrage, again.