The Liberals are all over themselves trying to stave off a double loss in this year’s general elections. Hear in Ontario, we have Premier Dalton McGuinty’s Minister Dwight Duncan touting corporate tax cuts, implying to voters they are part of “prudent fiscal management, [which] provides a solid foundation for supporting the economic recovery and ensuring long-term prosperity for the province.”
Although there are no changes proposed in this week’s Ontario budget to any corporate tax rates, McGuinty-Duncan have chosen to stay the course regarding previously approved and scheduled reductions from Ontario’s current 12 per cent to: 11.5 % this July, 11% July 2012 and 10% July 2013. This is in sharp contrast with the federal wing of the Liberal Party, which is advocating a tax hike from the current 16.5 per cent federal level to the old 18 per cent rate.
So we have Ontario Liberals telling us that reducing the corporate tax rate will be of significant benefit to the province, increasing jobs and investment, while at the same time federal Liberals are running on a platform that calls for increasing the corporate tax rate so we can have more money to spend on social programs.
So who is being truthful here?
I’m siding with the provincial Grits on this one. Firstly, we have sound economic advice from one of our country’s leading tax and fiscal policy experts, Jack Mintz, head of the public policy school at the University of Calgary. Mr. Mintz recently co-authored a new paper on business tax reform with Duanjie Chen.
Back in January 2011, Mr. Mintz said:
“Given the relatively insignificant anticipated revenue loss from a corporate reduction, it is clear that the investment and employment benefits make a strong case in pursuing this reform.”
And furthermore, Mr. Mintz said that every additional dollar raised through business income tax hikes translates into 37 cents in extra costs for the economy.
Mintz-Chen’s study found:
“On its own, the final cut to corporate income tax rates, from 16.5 to 15 per cent, would result in $30 billion in additional business investment and 102,500 new jobs over a seven-year period.”
Does this not make a prima facie case for reducing the corporate tax rate? But why confuse Michael Ignatieff with facts, after all, he’s trying to buy himself a shot at being prime minister, isn’t he? Facts just get in his way. But what about others in Ignatieff’s caucus? Can they not see the folly of his policy? Apparently, at least one does.
March 27, on the Roy Green radio show, the Liberal MP for Markham-Unionville, John McCallum, could be heard admitting that Ignatieff’s plan to raise corporate taxes from 16.5 per cent to 18 per cent would cost the Canadian economy jobs. (Link to clip here.) And remember, readers, John McCallum is one of the senior Liberals. He is a former Liberal cabinet minister and was the Royal Bank of Canada’s chief economist for six years.
Even Jack Layton sees corporate tax reductions as a benefit to Canada’s economy, but he’s almost as confused as is Ignatieff. (The Dippers seldom have the economics right, their pro-union animosity towards large employers clouds their judgment.) Mr. Layton is promising to cut the small business (small employers) tax rate to 9 per cent from 11 per cent. But he would also boost the corporate tax rate (large employers) to the 2008 level of 19.5 per cent from its current 16.5 per cent.
Confused? Who isn’t?
Isn’t it just common sense that the tax increase to large employers will kill as many or more jobs and investment than the tax decrease to small employers will create?
As Sir Walter Scott wrote: “Oh what a tangled web we weave, When first we practise to deceive!”
Is there no one in the federal Liberal campaign with some basic knowledge of economics? Perhaps, shamefully, they know but don’t care. We don’t expect the NDP to understand these things, but the Liberals?