The recent promise by Liberal leader Michael Ignatieff to rollback to 2010 levels tax cuts scheduled to bring the tax rate on corporate profits to 15 per cent from the current 16.5 per cent (was 18.5 per cent in 2010) begs the question of just what, in Ignatieff’s view, is the role of corporations in society. Are they simply cash cows to be milked to provide social services or are they primarily the job-creation engine of our capitalist economy and the providers of the pay cheques so essential to individual and family wellbeing?
The answer is important to us all, because if Ignatieff believes the latter he’ll want to do whatever he can to make sure corporations thrive in Canada. If he favours the former role, he’ll only want corporations just healthy enough to continue paying levels of tax high enough to help with his dream of a socialist Canada—much the same as Jack Layton’s NDP dream.
Ignatieff justifies his rollback promise by saying a tax cut only makes sense when Ottawa is in surplus. But do Liberals really believe this?
Ignatieff was a senior member of the Liberal Party when in June 2008 it announced in a press release that it would “accelerate and deepen the currently planned [by the Conservatives] corporate tax cuts.” And yet, during the run-up to the federal election that year, the Liberal Party of Canada accused the incumbent Tories of already being in deficit. So how does one account for the Liberal promise to “accelerate and deepen” tax cuts already planned by the Tories while running a deficit? You can’t really can you?
Look, corporations already pay a lot of tax, we call them payroll taxes: employer share of employment insurance, Canada pension and workers’ compensation premiums—all, of course, in addition to federal and provincial income taxes. Shareholders, the owners of the corporations, also pay income taxes on any earnings they receive from corporations.
And what do corporations generally do when they pay less taxes? The make additional investments, hire more people, expand—job creating things like that.
And does Ignatieff want to raise corporate taxes to reduce the deficit? Apparently not. According to his speeches he wants a billion dollar homecare plan. And, last February, Ignatieff said that Canada will get a national child-care program under a future Liberal government, no matter how big the federal deficit has grown. At that time, he said, “I am not going to allow the deficit discussion to shut down discussion in this country about social justice.”
Get the idea?
But what about those big banks getting a tax break when they already make enormous profits? Well, if that’s what bothering Ignatieff, he should be calling for greater competition in Canadian banking and other financial services. He should demand the Tories open the door to greater competition and let the market do its job. But perhaps Ignatieff does not believe in greater competition.
Canada is getting more competitive with its corporate tax rates, but it has a way to go to be among the most favourable. The planned cuts—which, by the way, are not new initiatives and have already been passed by parliament—will help us get there.