Morneau chides NDP for opposing end to 'unfair tax advantages' for wealthy

Finance Minister Bill Morneau is putting the squeeze on federal New Democrats, chiding them for failing to support his proposals to end what he calls unfair tax advantages for some wealthy small business owners.

In a letter to three New Democrat MPs, Morneau says he was surprised to receive a letter from them indicating that the NDP — normally a champion of reducing income inequality — supports "continued tax advantages for the wealthiest Canadians."

And he says he's disappointed by the NDP opposition to his "progressive proposal," which he contends is designed to "ensure a level playing field for the middle class."

The letter is in response to a letter sent to Morneau on Sept. 7 by Windsor-area MPs Brian Masse, Cheryl Hardcastle and Tracey Ramsey, in which the trio of New Democrats urge the finance minister to "heed the voices" of doctors, dentists, orthopedists and others who are vehemently opposed to the proposed tax changes.

They urge Morneau to "reconsider" his proposals and concentrate instead on "tax cheats" who hoard their money in illegal offshore accounts, robbing the federal treasury of some $6 billion per year.

In his response, Morneau notes that his proposed changes are supported by a number of organizations with which the NDP would ordinarily be aligned — the Canadian Labour Congress, the Canadian Nurses Association, Canadians for Tax Fairness, the Canadian Association of Social Workers, the Canadian Centre for Policy Alternatives and the Broadbent Institute.

"They understand that hard-working middle-class Canadians are not the focus of our proposed changes," Morneau writes the three MPs.

"Quite the contrary, we want to ensure that as our economy grows the benefits of that growth are shared with the middle class and those working hard to join it."

Morneau said the government is in "listening mode" as consultations on the proposed changes continue until Oct. 2 and said he wants to hear from New Democrats and their constituents if they believe the changes will inadvertently hurt middle-class families.

"I can assure you that our focus is on ensuring the wealthiest do not get tax advantages over and above what is available to other Canadians — and I would have hoped to count on your support on such a crucial issue of fairness and equity."

His letter was sent Sunday as Liberals brace for today's resumption of Parliament. Conservatives are promising to pummel the government over the proposed tax changes, which have raised the ire of doctors, lawyers, tax planners and other small business owners who've used incorporation to reduce their income tax burden.

The changes would restrict the ability of incorporated business owners to lower their tax rate by sprinkling income to family members who do no work for the business. They'd also limit the use of private corporations to make passive investments in things like stocks or real estate and limit the ability to convert a corporation's regular income into capital gains taxed at a lower rate.

In his letter, Morneau says the current tax system allows someone earning $300,000 to use a private corporation "to save about as much as the average Canadian earns in a year."

"This leads to situations where an incorporated doctor can be taxed at a lower rate than a nurse practitioner or police officer."

In their earlier letter to Morneau, the three NDP MPs argued that the proposed changes "may negatively impact the availability of health services in Canada."

The Canadian Medical Association and provincial medical societies have spearheaded opposition to the reforms, contending among other things that they'll result in doctors moving to the United States.

However, some doctors across the country are putting their signatures on a letter to be sent to Morneau this week in support of the reforms. They argue that the changes will promote tax fairness and give the government more money to spend on health care.

A copy of the open letter was obtained Sunday by The Canadian Press.