Ontario NDP proposes small business tax cuts in exchange for a $12 minimum wage

Andy Radia
Politics Reporter
Canada Politics

The minimum wage debate continues to rage on both sides of the border.

Those in favour of a wage increase argue that there are so many working individuals living in poverty; opponents claim that small businesses just can't afford any type of wage boost.

Well, here's a compromise from, perhaps, an unlikely group.

Ontario's New Democrats are proposing a trade off: they're suggesting an increase in the minimum wage in exchange for small business tax cuts.

The plan, introduced by party leader Andrea Horwath on Tuesday, would see the minimum wage rise to $12 by June 2016 (from the current $10.25) coupled with a cut in the small business tax rate from 4.5 per cent to 4 per cent this June, followed by a cut to 3.5 per cent in 2015 and 3 per cent in 2016.

"We need a balanced approach where families get a raise while ensuring small businesses grow and thrive to create more jobs," the NDP's small business critic Wayne Gates said in the legislature, according to the Bullet News.

New Democrats estimate the tax cut will save the province's small businesses roughly $90 million a year.

[ Related: Do workers have the right to a living wage? ]

The wage increase for tax cut trade-off isn't necessarily a new idea.

It's one that was recently touted by the Canadian Retail Council:

A recognition of the impact of minimum wage increases on employers,governments should also consider a reduction of employer’s payroll taxes (income tax, as well as premiums for Canada Pension Plan, health care and employment insurance), corporate income taxes, or small business taxes to coincide with the minimum wage increase

It's also an option currently being debated widely in the United States.

[ Related: Ontario raises minimum wage to $11 an hour, the highest in the country ]

But don't expect the proposal to go anywhere in Ontario.

The minority Liberal government — which has laid out a plan to increase the province's minimum wage to $11 on June 1 — isn't on board with the NDP plan.

Neither is the Canadian Centre for Policy Alternatives — a usual NDP ally.

"It sets the precedent that every time we talk about raising the minimum wage, businesses get to put their hand out for a tax cut too. Every time we cut taxes, there's less money to invest in transit, infrastructure and public services," Trish Hennessy, the left-leaning think-tank's Ontario directorm told Yahoo Canada News.

"It also accepts the argument that minimum wage has only negative effects, when there is a building argument that says businesses that pay a higher wage benefit from increased employee loyalty, less staff turnover, fewer training costs and productivity gains.

"So, all around, political theatre but not good policy. Bottom line: We can't give business a tax cut every time we say you have to raise wages. We just can't."

What do you think?

Are tax cuts for wage boosts a good compromise for jurisdictions across the country?

Let us know your thoughts in the comment section below.

(Photo courtesy of the Canadian Press)

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