Cuttin’ those small business taxes worked!

This is from a recent report out of B.C.:

Over the last five years, British Columbia has led the country in growth in the number of small businesses. Between 2001 and 2006, the count of small businesses in the province surged 11.0 per cent, more than triple the national growth average of 3.6 per cent. Alberta (+7.6 per cent), and Manitoba (+4.8 per cent) were the only other provinces to exceed the Canadian average. Declines among other provinces ranged from 1.4 percent in New Brunswick to 11.9 per cent in Saskatchewan.

They cut small business taxes to the bone, the CFIB cheered loudly, the Chamber of Commerce was grinning from ear to ear…..

…and the number of small businesses dropped.

Lovely.

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0 Responses to Cuttin’ those small business taxes worked!

  1. NB taxpayer says:

    That’s because the BC government hasn’t completely disengaged themselves from the ugly practice of corporate welfare. SME’s are much more successful in Alberta because their tax rates are low and the governments there (at a provincial level) disengaged themselves from the unfair practice. It has been banned.

    I’ve heard similar complaints (as yours above) regarding Bernard Lord’s small business tax cuts wherein they made the claim that it was unsuccessful because of the failure rate of small business in NB during the policy’s tenure.

    But what they failed to add was that his government engaged in the practice of corporate welfare as well making it difficult for SMEs to succeed.

    In other words, as long as corporate welfare is alive and well, credit and capital will be diverted fom successful firms to less successful politically connected firms. And even worse, firms that do not receive government assistance subsidize their government-supported competitiors through their corporate taxes. Thus, creating a very uneven playing field for business.

    ED decisions are not made in a bubble and all things, especially corporate welfare, must be taken into account when addressing SMEs and their rate of success and failure.

  2. mikel says:

    Come on, thats ludicrous. You think mad cow wasn’t corporate welfare? You think taking away municipal rights on factory farms and granting them all from Calgary isn’t corporate welfare?

    In New Brunswick I would perhaps agree that obviously its more than having low small business taxes that would make fewer companies-I mean, its pretty illogical to state that company’s paying LESS would make them go out of business.

    But look at the example above, corporate welfare for Atlantic Yarns. Which small companies do you think makes yarn and got put out of business because Atlantic Yarns got millions?

    But as we’ve posted here numerous times, taxes and even corporate welfare have little to do with it. Small businesses are started by entrepreneurs, and most entrepreneurs are young. Next, to be an entrepreneur you have to actually have a market. So if you are a small business, are you going to look at ontario and say ‘well, taxes are higher there, and auto insurance is higher, so therefore i’ll set up shop in New Brunswick’

    Of course not, companies went out of business because of either poor management or not enough customers. In BC and Alberta they have more small businesses because they have more of an economy and population.

  3. NB taxpayer says:

    In BC and Alberta they have more small businesses because they have more of an economy and population.

    That is such a crock. Lower taxes are important to small and medium-sized businesses. And you will see this in spades when McGuinty crushes the economy with more tax hikes. You just wait and see.

    Btw, with comments like that [above] mike, you should join Mr. Byrne and BNB on their mission to sell the red hot (cough, cough) NB IT sector to ppl in other provinces.

    At least then Byrne will be fully briefed on why we don’t have more small businesses in NB.

  4. mikel says:

    Apparantly you don’t read my blog, but you can read my points on that in spades. To paraphrase, I went to all the jobs listings for the province on various search engines and as David hints-those jobs don’t exist.

    One point doesn’t have anything to do with another. While its interesting that many pundits went to town on that study from the University of Maine about the EI programs of each province, much less emphasis was on the other study that said what we have said here, that tax rates are only a marginal issue.

    For more on that, type in RIM and Nova Scotia and read the in depth article on how the NSIB got RIM to Nova Scotia-tax rates weren’t even mentioned.

    The proof of this is in the numbers. The small business tax was lowered ‘across the board’ as you often talk about, yet companies kept going out of business. There was a DECREASE, not an increase. That’s just basic science-make a proposition, then test it. IF low taxes leads to more businesses then there would have been an increase.

    Lately you’ve been changing tacts and claiming that there has to be that extra ‘lack of corporate welfare’. Thats a statement that yet needs to be tested. As we’ve noted, Atlantic Yarns gets subsidized in order to produce yarn, how many ‘small businesses’ went out of business because they were trying to produce yarn? That requires very specialized equipment, importing licenses, in other words, a lot of work.

    In fact, I’d propose the opposite. I think capitalism would work fine IF the main tools of production were publicly owned, or at least worker owned. Then those subsidies would be public, and we’d know what they went for. Then the ‘competition’ aspect would come from people purchasing the fabric and making value added products. I suspect THOSE are the companies that went out of business.

    Another example is beer. Molson gets subsidized, Pumphouse does not. However, molson getting subsidized doesn’t mean Pumphouse LOSES, it means they don’t gain as much. IF they got subsidized then they could expand. However, IF they go out of business it wont be because Molson got subsidized, the liquor market is much bigger than that.

    For anybody reading this they should keep in mind as they read the ‘lower taxes’ across the board mantra, it is NOT based on economics, it is based on political philosophy. Companies of the size of auto plants in Alabama quite literally decide on how much taxes they pay. And with any problems they have direct lines to the government.

    New Brunswicks tax rate for small biz was the second lowest in the country, second only to Alberta. So companies should have been springing up all over. However, it MAY be true that there simply wasn’t enough time, business and economics don’t change on a dime. We don’t know that, but certainly the evidence leads to what studies and economists have stated-in a knowledge based economy taxation is very marginal.

    FatKat is doing just fine with the taxes the way they are, so are Ganong and Irving and McCain-again, because some of those guys are structured so they pay little in tax.