My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Friday, May 2, 2014

The Ontario Budget – The Simple Math – No New Jobs


Let me say this upfront. I think yesterday’s Ontario budget is fiscally irresponsible. However, I am prejudiced to start, as I am a Conservative voter and a bean counter.

Notwithstanding my political leanings, if the budget is ever passed into law, here is the reality of the situation.

As my readers are aware, I am the managing partner of my firm (Note: I have not yet discussed the implications of the budget with my partners, so these views are mine at this point and not of my firms and any venom from Liberal and NDP supporters should be solely directed at me).

Here is how our partner meeting after the budget is passed (if it is ever passed) will go. I will say to my partners we have 30-35 people in the office and the cost of the pension reform will be as high as $1,700 per person or somewhere in the range of $50,000-$60,000 before tax for our firm. Our income taxes have gone up say $3k to 4k per partner, so we are out $18,000-24,000. Thus, we will have $70,000 -$85,000 less in our pockets.

I would then proceed to say we are willing to absorb say 25% of this hit, but not the next 75%. Thus, we have three options: either we lay-off our weakest employee, don’t hire the person we were going to hire that year, or cut back our costs $50,000 -$70,000 (assuming we are absorbing 25% of the hit).

It’s very simple math and if people are honest, the same conversation will go on around the province and those employers with the ability to hire out-of province will do so. Those without the ability to hire out of province will have to decide whether to absorb these additional costs (some large corporations may also have an additional corporate income tax hit) or reduce their workforce to keep their total costs in-line.

The result, net-net job gains of zero or at best a job rate growth of an infinitesimal amount.

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