The Ontario Liberal party under Premier Kathleen Wynne is locked in a desperate fight for its political life as the Grits seek re-election in June.
Not surprisingly, the 2018 provincial budget showers goodies on virtually every constituency from parents with small children (proposed free childcare for children between the ages of two-and-a-half until they enter junior kindergarten), seniors (a new program to offset the cost of household maintenance as well as universal pharmacare for those aged 65 and older), transit users (a pledge to reduce GO Transit fares) and virtually every other group that might cast a vote in two months’ time.
Conspicuously absent from the budget are measures that will make a material difference in the lives (or to the bottom lines) of the province’s small and medium-sized business owners. Apparently, Wynne feels that entrepreneurs’ votes are already lost to the Progressive Conservative Party, and this budget will do little to sway business owners.
That’s because, for the most part, it offers little more than platitudes to help entrepreneurs cope with seismic economic shifts that are impacting organizations across industries—everything from the pressures of automation and globalization to the potential collapse (or at least radical overhaul) of the North American Free Trade Agreement.
The caveat here is that any discussion of the budget could be moot because if polls are correct, Wynne is almost sure to face defeat at the hands of Doug Ford’s PC party come election night. Ford hasn’t indicated whether he would roll back any of the Liberals’ spending measures introduced in this new budget. Much remains to be seen.
With that in mind, let’s review the significant details relevant to SME owners. The 2018 Ontario budget proposes to:
- Simplify personal income tax brackets and eliminate the province’s personal income surtax. Under the new proposed rules, a person earning $95,000 would pay an extra $168 per year in taxes. About 1.8 million people would see their taxes increase, while 680,000 would enjoy an average tax reduction of $130.
- Introduce a Good Jobs and Growth Plan focused on boosting business competitiveness and flexibility with $935 million in new investments in areas such as infrastructure
- Invest $30 million in post-secondary skills training programs
- Invest $63 million over three years in a new Ontario skills training bank
- Develop a so-called New Economy Fund to help companies cope with sectoral change with spending of $500 million over the next 10 years
- Introduce new pay transparency legislation that will require employers to post salaries or salary ranges when advertising job openings, while also prohibiting punishments for employees who discuss their compensation with co-workers; larger employers will also be required to report on pay gaps and workforce composition ‘by gender and other diversity characteristics’
- Introduce a new drug and dental coverage plan for Ontarians without extended coverage. The plan would cover up to 80 per cent of drug and dental costs up to $700 for a family of four with two children, $400 for single individuals. If implemented, the plan could help SMEs that lack the necessary funds to offer their own employee dental and drug plans, compete with larger rivals for top talent
The difficult reality here is that the budget is designed to help secure votes, not drive innovation, improve productivity or lower the tax burden for entrepreneurs. In fact, it will likely increase the burden on this cohort. In addition, the government is forecasting a $6.7 billion deficit for 2018-19 with a return to the black by 2024-25. The provincial debt is set to increase to 38.6 per cent of GDP by 2020-2021, up from 37.1 per cent in the current fiscal year.
Coupled with the ongoing rollout of new measures introduced last year with Bill 148, The Fair Workplaces, Better Jobs Act, it’s a tough time to own and operate a business in Ontario.
That legislation will increase the minimum wage to $15 an hour from the current $14 by Jan. 1, 2019, has already increased the number of personal emergency leave days available to Ontario employees to 10 (two of which must be paid) and introduced other new measures such as banning sick notes and increasing paid vacation time to three weeks for staffers with more than five years’ service with the same employer. Add in other new measures such as equal work for equal pay and workplace scheduling rules that are yet to take effect, and it’s easy to conclude that the government is more intent on levelling the playing field for workers than injecting new life into Ontario’s economy.
The only solace is that everything (or perhaps nothing) could change for entrepreneurs in two months’ time. Until then, it makes sense to make strategic adjustments to protect your bottom line—then prepare to make them again if a new government takes the helm.
Armando Iannuzzi, Partner