I don’t know about this. It seems once again the federal government wants to impose a national standard on provinces with very different economic, social and demographic realities.
Jim Flaherty encouraged all provinces to lower their corporate tax rates to 10 per cent by 2012. Alberta has already hit that mark, he said.
Now, I am sure that Flaherty is not a dumb guy but Alberta just announced a huge ‘tax’ increase in the form of increased royalties – that will amount to several billion more dollars per year in Alberta’s already rich coffers. Money they have reinvested in what is now the best education system in Canada (as measured by test scores), one of the best health care systems (their wages for nurses are the highest in Canada and they are picking off from the rest of the country), the most broadly distributed broadband network in Canada (funded in large part by government), and let’s not forget about the multibillion dollar heritage fund.
So, the point here is simple. Alberta rakes the corporate sector over the coals extracting 10s of billions of dollars while in New Brunswick corporate income tax accounts for only 3% of the provincial government revenue.
So, the last thing, in my opinion, we need to do is get back in this game the Tories played where you cut a couple of points off the corporate income tax rate (in their case the small biz rate) and then sit back and hope it leads to massive business investment – which it didn’t. In fact, the amount they cut out of the corporate taxes was about the amount they cut the Business New Brunswick budget.
And that is what I despise. Governments doing less in a proactive way to help communities adjust to the economic realities of the 21st century because they cut taxes in the vain hope that it would (like the ‘wizard’ in the Wizard of Oz) lead to massive business investment in new economy jobs and industries.
We’ve sat back and put record amounts of money into education, health care, roads, you name it – but have cut back on any spending related to economic development.
And now we read that Boudreau is looking at complying with Flaherty. Sheesh.
But go back to my very first sentence. I am conflicted about this. I do realize that lower tax regimes, combined with a host of other things, tend to attract more business investment over time and economic growth over time.
But just cutting taxes without those other things, is a dead end strategy.
And, again, look at the impact on the budget. They could wipe out all corporate tax for every company in the entire province and it would be less than the amount of increased Equalization accessed by New Brunswick in the past four years.
To put it another way, if we dropped all corporate taxes completely, it is likely we would get more Equalization anyway. That’s essentially what Lord did. While he was out bragging about the deep tax cuts for small business he was getting massive new Equalization payments from Ottawa.
Final point. I still have to believe that most businesses like most people understand that they need to pay some portion of their income to have the society we benefit from in Canada. I refuse to believe that corporations (or people) would like to cut their taxes to the bone and have their communities die and public services wither. Some might but most, I think, understand this thing called corporate ‘social responsibility’. You should read these reports sometime. The banks, for example, brag about how much tax they pay and how it impacts communities.
New Brunswick needs a competitive tax regime. But not at the expense of investments in our communities that are desperately needed to equip them for the 21st century.