Sure. Thank you for the question. I am an academic, so I'm going to start at the principles, but then I'll get into the specific example.
The principle here again is one of neutrality. We want a tax system that doesn't either favour or disfavour saving inside the companies. What this means is that we have to compare the taxation of savings inside a company with savings outside a company.
Right now, because of that small business deduction, there is an advantage for saving inside the firm. What the proposals do is try to peel back that advantage by imposing an extra tax inside the firm. That's what it does to balance the saving inside and outside the firm.
Now, to do that, one has to impose this extra tax inside the firm, and this is where you get numbers like the one that you suggested for particular circumstances. For example, if you're a high-bracket Ontario taxpayer who already has $220,000 of other income, your extra tax that you would pay, should you flow through your passive income, would be in the range you've suggested, but that's not something that's universal.
I can take another example, which would be that of someone who's making $50,000 as a small business person and immediately flows it through to their pocket, because they're not saving big pots of money: they're trying to feed their family. That person faces a tax rate of about 30%, whether it's taken through dividends or through employment. That's the kind of thing that I think matters to most small business people.
In thinking about what is the taxation of a big portfolio of hundreds of thousands of dollars of assets, we have to get that right. We don't want to do that unfairly, but I don't think that's the main focus for most business people.