THE EDITORIAL PAGE Tax reform no friend to entrepreneurs

The reality of Finance Minister Michael Wilson’s long-vaunted proposed overhaul of the whole federal tax system, with its promise of simplicity, fairness and “revenue neutral” is starting to hit home. And we don’t like what we see, for it is now apparent that those who save, risk and are successful in accumulating equity capital are going to be the hardest hit by this so-called reform. It is our firm belief that increasing the tax load that penalizes risk takers and entrepreneurs is counter-productive and can only lead to a lower standard of living for all.

We see this Wilson plan as a total departure from the spirit of his initial policy (which we applauded) that ushered in a capital gains tax holiday to encourage investment. Now, not only is that capital gains exemption being drastically reduced, but the very taxes themselves are to be raised. Indeed the top marginal tax rate on capital gains will now rise to over 39%, one of the highest rates of any country in the world. (Britain’s is 30%, the U.S. recently raised its from 20% to 28%).

And while the highly productive flow-through share mechanism has survived this most recent reform program (which again we applauded), it now becomes abundantly clear that the combined effect of the new proposals will substantially reduce those tax incentives heretofore available.

Now, every dollar of savings is to be taxed, including that $1,000 a year in tax-free interest. And looming ominously is a broad-based federal sales tax system that will hit everyone hard, dramatically increasing our cost of living and inducing more inflation.

But what truly galls us is the complete lack of any plans to cut federal spending. On the contrary, the feds’ recent White Paper on Defence proposes some staggering new expenditures, including the purchase of 10 foreign-built nuclear submarines at a capital cost of at least $10 billion, not to mention the cost of staffing, operating and servicing them. In our book, this one just about tops the list of Ottawa’s dumbest moves.

It would even help if the Mulroney administration would start trimming spending at the bottom, like the travel expenses of its cabinet ministers jaunting around the world. Again, it galls us to see the likes of External Affairs Minister Joe Clark off to Africa with his retinue to tell the S outh African government how it should run that country. Quite appropriately, their response was “get lost.”

Mr Clark is a key member of a government that has raised taxes to historic high levels and yet can’t help running up $30- billion deficits in what are reasonably good economic times. They have shackled our economy to the point where it is necessary to take over a third of all taxes collected just to service the debt — $26 billion a year (and rising rapidly) just to pay the interest, with no thought whatsoever of any debt retirement.

Most Canadians have seen their tax bite up almost 100% since the present government assumed office. And at the same time, they see the federal debt rise by some $100 billion. And we are telling others how a country should be run?