Fall Back Up with Jeremy White

Jeremy White and his wife Melanie were looking for a summer retreat in Cape Breton after honeymooning in 2008. What they found were a new way of life and a successful small business.

Big Spruce Brewing sprung from a passion for craft beer and a serendipitous real estate buy in Nyanza.

Jeremy’s background was in international engineering and while living in Nicaragua, they stumbled upon an opportunity to relocate to Nova Scotia.

He had been a home brewer for years, and have wanted to scale his production up to a commercial level for a long time.

With favourable condition for growing hops and an industry that has been taking off in the region, they opened up Nova Scotia’s first certified organic on-farm brewery. Big Spruce quickly established itself as a local favourite.

Jeremy has made his views known broadly about the public policy challenges facing the craft beer industry publishing this open letter to the people of Nova Scotia.

In our wide-ranging conversation, we talk about the challenges of starting the brewery, his ongoing frustration with regulatory issues and his views on the future of craft brewing and the Atlantic Canadian economy.

I spoke with him in the brewery in the beautiful setting overlooking the Bras d’Or Lakes.

Click here to listen

Winter is Coming

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Nova Scotia’s electoral Game of Thrones is in full swing and while it may lack the dramatic flair of the HBO series, it has one thing in common, winter is coming. Unfortunately, the parties are either unaware of it or are seemingly oblivious to a stark reality.

All of the parties have launched their offensives by flinging open the doors to the treasury, each with new and creative ways to spend our tax dollars with the greatest political efficiency.

The number one priority for CFIB’s 5,200 members in Nova Scotia, consistently, is a reduction of the overall tax burden and the clearest path to this is through alignment of public sector wages and benefits to private sector norms and an overall reduction of the size of the public service. In other words, reduce the cost and the size of government.

For those who argue we have already been dealing with austerity budgets, here’s the reality. Since 2007 Nova Scotia government spending has risen from $7.3 billion to $10.5 billion, an increase of 43 per cent. Additionally, we’ve seen a whopping 22.5 per cent increase in our debt from $12.4 to $15.2 billion over the same time period. All this with an increase of only 16 per cent in the CPI (inflation) and our population flat-lining at 1.5 percent. This is not restraint and certainly not “austerity” by anyone’s definition.

Spending restraint is becoming more important than ever before. Perhaps because the weather is warming our politicians are floating sunny prognostications but there is an inevitable, relentless sociological cold front headed our way. Stretching our Game of Thrones metaphor, let’s call it “The Wall”.

According to Statistics Canada, that “wall” can be found in baseline population predictions. In 20 years, those over 65 years of age will make up fully 30 per cent of our population. A great majority of those will be out of the workforce and needing higher levels of healthcare. Keep in mind, in 2013, that same cohort made up only 17 per cent of Nova Scotia’s population.

By 2038, the forecasts indicate our median age will be nearly 50 and our overall population is expected to decline to under 934,000.

So who will carry additional tax load? If you’re a voter in your 20’s and 30’s, have a look in the mirror.

While efforts are being made to increase immigration, and claims are being made about having the largest population “ever”, the fact remains, unless we make some fundamental and dramatic changes to the way our government spends, we will be faced with some very, very difficult decisions indeed.

Absent in all of the spending promises in this election is a discussion of any long-term fiscal planning to deal with this issue. By long term, we don’t mean 4 years out, we mean 25 years out. Intergenerational forecasts which will set sustainable spending patterns.

Where are the real plans to deal with the inevitable decline in revenues from a shrinking and aging workforce? While some creative gains are being made through immigration, they are incidental and the problem is not getting people to Nova Scotia, it’s keeping them here. More than half of those who arrive leave within five years.

It’s not much wonder as we’ve been struggling with economic growth and carry the some of the highest tax burdens in the country. Our public service is nearly 5 points larger than the national average and their salaries and benefits are completely out of whack with private sector norms. Is anybody connecting the dots?

Meanwhile, the front pages are littered with political spending sprees.

Small business owners want politicians to have the courage to not just stop the bleeding, but begin to fix the problem through an actual reduction in the size of government, lowering the costs of doing business and a putting laser-like focus on better regulation and more efficient service delivery.

If not, we are sentencing our next generation to a cold, bleak future, on the other side of the wall.

This originally appeared in the Chronicle Herald, May 13, 2017

Nova Scotia’s pre election budget: anger and gratitude

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Nova Scotia Finance Minister Randy DeLorey looks on as Premier Stephen McNeil speaks in Nova Scotia Legislature 

Premier Stephen McNeil must be listening to Tony Robbins. One of the tenets of the motivational speaker’s philosophy is it’s impossible to be angry and grateful at the same time. McNeil’s recent budget leverages the idea in spades.

CFIB members have been lobbying for tax relief over the last four years. Finance Minister Randy DeLorey delivered one of our key asks, to raise the small business tax threshold from $350,000 to $500,000, giving small business owners the capacity to retain more money in their business to innovate and create employment. Check that box.

Additionally, we’ve been adamant about providing some relief on personal income taxes, especially so lower-income earners can keep more of their earnings.

By raising the basic personal exemption by up to $3,000 for those earning less than $75,000, many low-and-middle-income earners in the province will see more of their paycheck, a much preferable mechanism than raising the minimum wage.

As we’ve argued for years, as a poverty-reduction measure, minimum wage is ineffective because government becomes the principal beneficiary through higher taxes. With this adjustment to the basic personal exemption, thousands more lower-income Nova Scotians will pay no provincial tax at all.

Another positive benefit of the budget for small business owners is the provincial government’s measurable commitment to reduce red tape. This is a principal file for CFIB. We have been supportive of the efforts of this government to put in place the structures to begin reducing unnecessary regulatory burden. Nailing down a target of $25 million in cost to business is the right thing to do.

CFIB members will be grateful for these improvements, which may temper taxpayer anger heading into the predicted provincial election. While these measures are sensible, and should be commended, there is still much work to be done on tax reform to put Nova Scotia in a competitive position.

We remain concerned, however, about the propensity of government to create boutique programs to benefit specific sectors. While there are programs geared toward small business growth in areas such as export and innovation, historically the programs go largely unnoticed or unused.

Leaving more money in the hands of small business owners to reinvest, without forcing them through the rigours of bureaucratic process to access benefits is a far more efficient and desirable approach.

Preparing for an election, it’s not hard to see why this government has chosen the former option. It provides more control over who will be the principal beneficiaries and constituencies. That is a simple political calculation.

Many small business owners remain frustrated by high taxes and governments that seem out of touch or ambivalent to their needs. This is a good start, but it’s only a start.

It has been a very long time since the people in Nova Scotia have seen any meaningful tax relief at all. A morsel can seem like a feast for the starving. Now that the math is done in the Department of Finance, it will, presumably, be put to the people of Nova Scotia to determine if they are indeed grateful or angry.

This post originally appeared in the Chronicle Herald, April 29, 2017 on day prior to the call of the 2017 provincial election.

Of Torches, Pitchforks and the Small Business Business Tax Rate

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As the story goes CFIB founder John Bulloch was sitting in his tub reading a federal government white paper on tax reform in 1969. When he saw the government planned to “realign” the economy by raising taxes on small businesses in Canada, he took action. He exposed the scheme in the Toronto Telegram and the ensuing protest was the closest thing Canada had seen to the villagers storming the castle with torches and pitchforks. Thousands of independent business operators came together to protest the idea and out of this movement, CFIB was created.

Since that time, CFIB has argued for a lower small business tax rate to recognize, among other things, the disadvantage small firms face when trying to access credit and raise capital to reinvest in their businesses. When it comes to tax policy, the Small Business Tax Rate (SBTR) is our DNA.

That being said, as governments prepare their spring budgets, the recommendations are now beginning to flow from vested interests to guide the decisions being made by Ministers of Finance and their departments. Right on cue, the Atlantic Provinces Economic Council (APEC) has released its Atlantic Report titled Exploring Opportunities for Tax Reform, providing fiscal policy recommendation for each of the four Atlantic Provinces.

Three key recommendations were put forward for Nova Scotia. Interestingly, the first two have been long standing positions articulated by CFIB in its pre-budget submissions over the past decade. The first recommendation is to “focus on expenditure restraint in balancing its budget beginning and laying the groundwork for growth-oriented tax reform”. CFIB members would agree wholeheartedly. Government must begin its budgeting exercise not by searching for new and exciting ways to tax us, but to apply a very sharp pencil on the spending side of the ledger.

The second recommendation is to begin annual indexation of its personal tax brackets. CFIB has been fighting what is otherwise known as “bracket creep” since the Hamm government de-indexed the personal tax brackets some 15 years ago. If you’re wondering why, my CFIB colleague Nick Langley summed it up pretty well when he said “If you are earning minimum wage in Nova Scotia, the amount of personal income tax collected by the provincial government has increased by 275 per cent in the last 15 years.”

It should also be noted bracket creep was highlighted in Laurel Broten’s Nova Scotia Tax and Regulatory Review ‘Charting a Path for Growth,’ released in 2014. Her recommendation is a built-in cost-of-living adjustment for personal income taxes. It’s a sensible approach CFIB put forward when we met with Ms. Broten during her stakeholder consultations. So far, so good.

However, it’s the third recommendation from APEC where we part ways. It should also be very alarming to all small business owners. APEC recommends more than doubling the provincial Small Business Tax Rate, beginning January 2017, from 3% to 7% and a reduction of its general corporate tax rate from 16% to 12% by 2021. This recommendation echoes Ms. Broten’s original notion the taxes on larger corporations in Nova Scotia should be reduced and the reduction should be paid for by smaller business.

Nova Scotia currently has a competitive SBTR, but it continues to have the lowest small business tax threshold, the amount below which a business is eligible for the rate, at $350,000. Every other province in the country has a $500,000 threshold. This already puts small business in Nova Scotia at a competitive disadvantage with the rest of the country, raising the SBTR would only add insult to injury.

At risk of attributing motivation to these recommendations, it should be noted that APEC board is comprised of representatives of some of the biggest corporate entities in Atlantic Canada, so it’s not hard to see where this is coming from. To be fair, CFIB agrees with APEC the general corporate tax rate should indeed be lowered. It will create a more competitive environment to attract larger firms and offers greater opportunity for job creation and investment. That’s fine, just don’t make small businesses pay for it.

It’s hard to imagine the Premier would be prepared to head out on the election trail in 2017 selling the idea to small business operators that the reason they’re paying higher taxes is so the province could provide a break for Irving, Fortis, Emera and Sobeys. Really?

If the past two budgets are any indication, this government doesn’t seem to have much appetite for going to war with small business over the SBTR. Both of the previous Finance Minister’s budgets wisely ignored Ms. Broten’s suggestion and there are few indications Premier McNeil, a former small business operator, would embrace the suggestion from APEC.

In fact, CFIB has been very supportive this government’s efforts to help small business by laying the groundwork to reduce regulatory burden in Nova Scotia. However, any move to add additional financial burden on small business through an increase in the SBTR is, from CFIB’s perspective, a non-starter.

Should the government actually decide to heed the advice of large corporate interests and raise taxes on small business to pay for a break for larger corporations, it won’t be just the film industry circling province house, every small business owner in the province will have reason to pick up the torches and pitchforks.

What Will a Liberal Majority Mean for Small Business?

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October 18th to 24th is Small Business Week in Canada. Every year, organizations across the country mark the importance of entrepreneurship to our economy. This year Small Business Week was kicked off with a wholesale change of government and there was lots of talk about small business during the campaign.

The health of the small business sector is critical to the economic success of the country. The Canadian Federation of Independent Business (CFIB) is proud to provide a strong voice for our 109,000 members to ensure their opinions are heard when politicians are making decisions.

So what does this Liberal majority mean for small business? There is both good news and some cause for concern. During the campaign, the Liberals committed to reducing the small business tax rate to 9% by 2019 and to reducing employer Employment Insurance (EI) premiums from $2.63 to approximately $2.31 in 2017. We also like Justin Trudeau’s plan to waive EI premiums for new jobs for young people for the next three years. This will certainly encourage hiring in a segment of the population that can use a leg up.

The Liberals have also promised to maintain the Canada Job Grant while reinstating the federal-provincial Labour Market Development Agreements. According to their platform this will provide the provinces and territories with half a billion dollars per year in skills training. CFIB also supported two recent Liberal MP Private Members Bills including Emmaneul Dubourg’s bill to allow small business owners to pass their business to their children free of capital gains and Ted Hsu’s bill to bring back the long-form census.

These are all good measures.

On the other hand, there were a couple of red flags. The comment made by Mr. Trudeau suggesting a large percentage of small firms are used as tax-shelters requires clarification. The vast majority of small firms are legitimately using the small business deduction. If Mr. Trudeau was talking about ensuring that the deduction is not being abused, we can support that position. If there is a move to limit access to the small business deduction, as is taking place in Quebec, CFIB will raise strong opposition.

CFIB is also concerned about the Liberal plans to increase CPP premiums. We will be asking the new government to put this idea on hold until the economy is in better shape. Because CPP premiums act as a tax on every dollar a business pays to its employees, it is a big disincentive to hiring at a time when the economy needs just the opposite. CPP expansion is currently our members’ number one area of concern and we will be reaching out to learn more about the Liberals’ plans.

We are hopeful this new government will take note of our members concerns. Most have a direct impact on the bottom line of small firms and in turn the success of the Canadians who run them and are employed by them.

Now, with the election behind us, this week we want to focus attention on the importance of small business to our communities. On October 24th, CFIB is sponsoring Small Business Saturday to encourage the community to recognize the contribution of our local entrepreneurs by making a conscious choice to support local business.

We are asking you to take some time this Saturday to cast a vote for small business in your neighbourhood. Drop in for a meal, listen to some music, purchase a gift, get some groceries, have your hair done, drop off the dog for grooming or pick up that item you need for your home.

By supporting small business in your area, you are supporting your family, friends and neighbours. These are the same folks who often sponsor your kid’s sports teams, local cultural events and community projects.

At CFIB we believe small business makes Canada a better place. We hope this Saturday you’ll make your part of Canada a better place for small business.

Small Business Tax Hike Sticks Out Like A Sore Thumb

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Nova Scotia’s Tax and Regulatory Review included a number of sound recommendations for the McNeil government to consider. In fact many of the recommendations put forward by CFIB in our submission can be found throughout the report.

What is completely incongruous is the suggestion that big business should benefit from a corporate tax reduction paid for by an astronomical hike in the small business tax rate. CFIB has fought to have the small business tax threshold raised to $500k from $350k since the Dexter government reduced the threshold. As identified in the report, having the lowest threshold in the country was a clearly identifiable disincentive to growth. Why, in the same breath, the author would suggest raising the small business tax is puzzling.

This plan highlights a corporate tax cut for big business at the expense of small business. This is not a drawn conclusion, it states in the report the small business tax hike is actually designed to pay for the corporate tax cut. Raising the small business rate from 3% from 8% will give Nova Scotia the honour of having the highest rate in the country. It will deter small business start-ups, act as a disincentive to immigration and lower Nova Scotia’s growth prospects.

CFIB welcomes the inclusion of many of the recommendations in this report. There are many wise and strategically sound measures. As mentioned, raising the small business tax threshold brings Nova Scotia in line with the rest of the country. Expanding the small business Equity Tax Credit may prove useful to start-ups. Seeking more interprovincial cooperation on this and other regulatory matters is also helpful.

On red tape, the report recommends naming a Minister responsible for Regulatory Modernization, creating an Office of Regulatory Modernization and launching a three-year plan to eliminate ineffective, out-dated or inefficient regulations. Nova Scotia used was a leader in regulatory reform but much of that momentum has been lost in recent years. It’s encouraging to see government taking the impact of red tape seriously so that our businesses and government can be more productive.

Regarding personal taxes we’re pleased to see a recommendation to boost the basic personal amount (the amount Nova Scotians get to keep before they begin paying taxes) and eliminating bracket creep by introducing automatic indexation so that the personal income tax system is adjusted each year with the cost of living.

How to create a better environment for small business in Nova Scotia is outlined very clearly by the Ivany Report. Much of what was included in this latest review reflects those findings and the author should be applauded for listening carefully to input and applying it to this document. In contrast, a small business tax hike sticks out like a sore thumb. CFIB will be fighting the adoption of such a strategy at every turn and strongly encourages the government to dismiss any advice in this report that would further disadvantage small business in Nova Scotia.