Profits as a share of provincial income are projected to rise from 9.5 per cent in 1996 to 11.1 per cent in 1998. Excellent cost control, rising demand and Ontario's strong competitive position should support a sustained recovery in corporate profits. The small business sector is an important and dynamic sector of the economy. Businesses with fewer than 100 employees accounted for 96 per cent of the net job growth in the 1980s and for 31 per cent of the net job losses in the 1990 to 1993 period, the latest period for which data are available. Higher personal tax rates, the imposition of the Employer Health payroll tax and successive rounds of income tax hikes and minimum wage increases contributed to the poor performance in the early 1990s.
Lower taxes are particularly crucial to small business.
These businesses often depend on the reinvested earnings of their owners for capital. A recent survey conducted by the Canadian Federation of Independent Business revealed that 80,000 small enterprises are ready to increase hiring plans as a direct result of Ontario's tax cuts. Lower personal taxes will contribute both to increased investment in existing business and higher business formation rates. The prospect of keeping a larger share of earnings will increase willingness to innovate and take risks. Small business will also benefit from the reduction in payroll taxes.