October 25th, 2000

Small business owners face tough election choice

As small business owners start paying attention to the federal election campaign, there are several key issues they should consider before deciding where to cast their support.

Although there are five parties with the support of ten per cent or more of the Canadian electorate, only two of them have a realistic chance of forming a government: the Liberals and the Canadian Alliance. The New Democratic Party, Bloc Québécois and the Progressive Conservatives are too far behind and will only play a role in regional campaigns.

The NDP has made considerable headway during the past few years, moving more toward the center of the political spectrum. But the party remains too beholden to union interests and interventionist policies to merit serious consideration.

The only way to describe the Bloc Québécois -- the other left-of-center political party -- is to say that it seems to have gotten JFK backwards. Its philosophy can best be described as: "ask not what you can do for your country, ask what your country can do for you." According to the Bloc, solutions to most of Canada's problems can be found in the transfer of more money and powers to Quebec. The party is strictly regional based, and has the dubious record of not having promoted a single constructive economic policy during its two mandates in Ottawa.

Every time you think Joe Clark is finally down for the count, he rises from the ashes long enough to shoot himself in the foot once again. Only this time he is likely to shoot the Alliance in the foot as well.

The federal Tories are going nowhere, and Clark will likely lose his own Alberta riding. The best the party can hope for is to hang on to a few seats in Atlantic Canada. The only impact they could have, is that they could steel enough right-of-center votes from the Alliance in rural Ontario ridings, to allow some Liberal candidates to squeeze through.

The Liberals and the Alliance are the parties whose policies merit the closest scrutiny.

The Alliance platform calls for a significant decrease in the role of the federal government and a de facto devolution of powers to the provinces. Cuts would be made in Human Resources Development Canada spending, the CBC, international aid, Via Rail and a host of other areas.

The Alliance would also put and end to most corporate welfare programs such as Technology Partnerships Canada and several programs in other departments such as Industry Canada. The idea is to get government out of the business of picking winners and losers.

The center-point of the Alliance program is its call for a single rate tax of 17 per cent on all income, with a basic personal exemption of $10,000, a well as exemptions of $10,000 for a spouse and $3,000 per child.

This would take place in two phases. During the party's first term in office a second rate of 25 per cent would remain in effect on all income above $100,000. This second rate would be phased out later. The Alliance would also lower payroll taxes, and cut the rate that small businesses pay on their first $200,000 of income from 12 per cent to ten per cent.

The Liberals have not yet released their policy document, but Finance Minister Paul Martin's mini-budget and the many pieces of legislation the government let die on the order table in order to call their election, give a good idea as to their intentions.

The Liberals favor a wide variety of personal, business and capital gains cuts. Most of these are clearly of the "me too" variety, designed to steel votes from the Alliance. Although these tax cuts are not as deep as those proposed by the Alliance, especially in the areas of payroll taxes and the small business corporate tax, they are nevertheless a step in the right direction.

The Liberals made good progress toward banking reform in the Financial Institutions Bill they introduced into the House of Commons. A lot of work went into this legislation, which by allowing new competitors into the financial services industry could have provided small businesses with new sources of credit. But by calling the fall election, the Liberals let the bill die on the order table, and much of the work was wasted.

Bolstered by a strong U.S. economy, the Liberals presided over a period of stability and economic growth. In his budget speech Martin stated that spending would not rise faster than the rate of growth in the economy. Although this may seem like an innocuous comment, it is in fact a clear signal that new spending programs are in the works, at precisely a time when more money needs to be given back to Canadian taxpayers.

But the differences in the two parties should not be over-dramatized. Both party leaders tend to vacillate their positions in response to swings in public opinion. What will be interesting is how solidly committed they remain to their platforms, as they are exposed to the close scrutiny of an election campaign.

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