Federal Finance Minister Bill Morneau is climbing down from another controversial tax proposal to address the concerns of farmers and fishers.

Morneau made the announcement at a farm alongside Agriculture Minister Lawrence MacAulay in Erinsville, Ont., about halfway between Toronto and Ottawa, and three area Liberal MPs.

Morneau said the government is abandoning the proposed tax reform that would have restricted the conversion of income into capital gains.

"We're going to take a step back and reconsider that aspect of our tax proposal," he said.

The proposal would have made it more difficult for farmers and other business owners to pass on their businesses to their children.

Proposed reforms had raised fears they could add significant costs for some business owners who hope to keep certain types of businesses — like farms — in the family.

Morneau has already said he has listened to the worries and that technical fixes were likely on the way to address the issue.

Finance Minister Bill Morneau, centre, speaks with John Maclaughlin and his wife Lori Forester in Erinsville, Ont. Thursday. Morneau said his new tax proposals will ensure farmers and fishers can pass on the family business. (Lars Hagberg/Canadian Press)

Earlier this week, the government also ditched another proposed measure that would have had a negative impact on the intergenerational transfer of family businesses.

Morneau also announced this week that he will scale back a proposal to crack down on passive investment income, which was one of the most contentious elements of his plan.

The Liberals are continuing their week-long effort to adjust the proposals in hopes of calming angry entrepreneurs, doctors, farmers, tax experts and Liberal backbench MPs.

On Monday, the government announced plans to cut the small business tax rate from 10.5 per cent to nine per cent by 2019.

The reduction was first announced in the run-up to the 2015 election campaign. The plan is to lower the rate to 10 per cent on Jan. 1, 2018, and to nine per cent on Jan. 1, 2019.