NDP leadership candidate Erin Weir is proposing to focus Saskatchewan’s Small Business Deduction on genuinely small businesses with taxable profits of up to $100,000. This policy would increase provincial revenues and fund targeted tax measures directly linked to investment and employment.Now, Weir's proposal doesn't entirely close what he identifies as a loophole. (Nor would it entirely fix what strikes me as the most obvious problem with a small-business threshold in encouraging the proliferation of multiple corporate entities to avoid growing to a particular size - as the per-business tax credits and premium rebates would mimic the same effect to a lesser extent).
“We should close business tax loopholes that are not connected to investment or employment,” said Weir. “To help create jobs, I would rebate workers’ compensation premiums for the first four years that a newly hired worker is employed and restore the Saskatchewan Film Employment Tax Credit.”
To encourage investment, Weir is proposing a tax credit equal to 2% of the first $100,000 of capital invested by any corporation. Under this plan, a genuinely small business that reinvests its profits in Saskatchewan would pay no provincial tax.
[The change in the small business deduction threshold] would recoup at least $200 million of annual provincial revenue. The premium rebate would cost $30 million when fully phased-in and the investment tax credit would cost $70 million, leaving a further $100 million to fund other public priorities.
But it's well worth asking whether it actually makes sense to provide more favourable treatment to some businesses based solely on their size in the name of small-business jingoism.
Instead, Weir's plan provides incentives for growth in both capital investment and hiring. Which means that incentives would then be directed toward the activities that actually increase economic development, rather than falling into the all-too-frequent trap of declaring "we want X to like us, let's give favourable tax treatment to X".
Needless to say, there's reason to doubt that the small business tax proposal will be met with the same universal agreement as Weir's previous push to eliminate corporate and union donations to provincial political parties. But how the other candidates respond will say plenty about both the role they see for the provincial government in economic development, and their willingness to deal with that question based on principle rather than political expediency.
Update: Scott has more here. And as Erin notes in comments, Cam Broten and Ryan Meili have already responded - but have done so by falling back on the "small business" mantra without substantively addressing the question of whether more targeted incentives can encourage growth for less cost than broad loopholes.