The wrong time to cut corporate taxes
NationalPost.com – opinion
Friday, Feb. 25, 2011. Scott Brison, National Post
The $13-billion budgetary surplus the Conservatives inherited when they took office in 2006 is gone. It has been replaced with a $56-billion deficit, the largest deficit in our history, and the Parliamentary Budget Officer is projecting that the government will add more than $200-billion in new debt by 2016.
Meanwhile, the youth unemployment rate has reached almost 15%, we are facing a demographic shift that will place increased demands on our health care system, and obtaining the jobs of tomorrow has made education and training more important than ever before.
At the same time, more and more Canadians are looking to retire, at least those who can afford to, so there will be fewer people in the labour force paying taxes.
In the face of this Stephen Harper is reducing taxes for Canada’s largest corporations by $6-billion. Canadian families would be justified in wondering why Canada’s biggest businesses are getting a $6-billion tax cut when they are finding it difficult just to make ends meet.
Canadian families are paying 29% more for out-of-pocket health care expenses. Over 40% of family care givers are using personal savings just to survive. Record household debt has resulted in the typical Canadian family now owing $1.50 for every dollar of disposable income. Personal bankruptcy rates are up by 33%.
Students are also facing a personal debt wall as nearly two-thirds of parents think they will not be able to afford post-secondary education for their children, and 16% of low income students are considering suspending their education because of high student debt.
Notwithstanding the massive federal deficit, the Conservative government is borrowing $6 billion to give big business a tax break. This tax break will only benefit 5% percent of Canada’s businesses while over two million smaller businesses will see no tax reduction at all.
Not only are the Conservatives digging a deeper fiscal hole to pay for tax cuts that we cannot afford, they are ignoring the plight of struggling small businesses and ignoring the needs of Canadian families in order to pay for it.
Canada deserves better than that. The Liberal Party believes in competitive corporate tax rates. That’s why the previous Liberal government cut the corporate income tax rate from 28% to 19% in four years as part of the largest income tax cut in Canadian history. But that was after the books were balanced and Canada was recording budget surpluses. It was not done on borrowed money then, and it shouldn’t be done on borrowed money now.
Canada’s corporate tax rate, which is 25% lower than the U.S. and is the second lowest in the G7, is already competitive and so there is no pressing need to cut corporate taxes further at this time.
The Parliamentary Budget Officer and the International Monetary Fund have both raised concerns about when Canada’s books will be balanced. In fact, following a 40% increase in the size of government in the last four years they believe that the Conservatives have given Canada a structural deficit.
Structural deficits are bad for business as they create uncertainty. With ballooning debt levels, the public’s ability to sustain investments in infrastructure and social programs like health care and education are imperilled. Persistent deficits also inevitably lead to higher taxes as interest costs increase.
The best thing that the government can do to improve the business climate in Canada is to get back to balanced budgets.
It is also clear that corporate tax cuts are not always the most effective way to create jobs. The government’s own numbers show that when it comes to creating jobs and economic growth over the last two years, a dollar spent on public infrastructure has been eight times more effective than a dollar spent on corporate tax cuts.
With record deficits, an aging population, increased demands on health care and education, and a shrinking tax base, this is no time for the Conservatives to gut Canada’s fiscal capacity with reckless corporate tax cuts on borrowed money.
Now is the time to balance the budget and help Canadian families. That is why the Liberal Party would cancel the most recent corporate tax cut and use that money to reduce the deficit, put us back into surplus and to invest in the priorities of Canadians such as helping Canadians with the rising cost of living, family care giving, saving for retirement and access to post-secondary education.
* Scott Brison is the Member of Parliament for Kings-Hants and finance critic for the Liberal Party of Canada.
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