Old Faithful

One thing you have to admire about the CFIB, they are consistent. No waffling there. In today’s TJ Leanne Hachey, Vice-President, Atlantic Canadian Federation of Independent Business (CFIB), demanding the province cut small business taxes. Unidimensional. Consistent.

When Lord cut small biz taxes, the CFIB praised him to the highest mountain. Four years later, after New Brunswick had the second worst small biz performance in North America – nary a word out of the CFIB.

When will the CFIB admit that the success of small businesses doesn’t rest with one or two point tax cuts. All of Lord’s small business tax cuts combined amounted to about the cost of a Starbucks coffee per day per small business.

If the CFIB was really interested in the economic health of small businesses, it would focus on the underlying reason why they do so poorly in New Brunswick – because of the chronic economic challenges.

The best thing that could happen to the small businesses in the Miramichi would be for the mill to restart or some other large industrial company to come in with 800 high paying jobs. Then, the SMEs would have better outcomes. The same story applies across the province.

Diddling around with small biz tax rates while hundreds of high paying jobs disappear is silly. The CFIB should be right out front demanding that the government work to ensure that we receive our share of national and international business investment which in turn will gird up the SMEs and ultimately create the opportunity for genuine tax cuts. Cuts not based on a short term political pressure but cuts as a dividend for the strong economic growth in the province.

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0 Responses to Old Faithful

  1. mikel says:

    At least the line from these guys makes sense. They have 105,000 businesses across Canada as members. How many of those do you think are in New Brunswick? How many of those do you think are in Miramichi?

    These would be businesses like Bird-Stairs, Pizza Delight, perhaps owners of many of the Tim Hortons.

    So really, why would they be lobbying for big industry? First of all, subsidies for big industry comes out of their pockets as well.

    Second, restaurants, coffee houses, etc., all usually make money no matter what the local economy does. And just because a big industry locates there, doesn’t mean suddenly more people come in their doors.

    The people who WOULD be arguing your view would be companies that directly sell to these industries-and I suspect they are a lot fewer in number than you suspect, and a good many of them are owned by Irving or McCain-in other words, they aren’t likely to be members of CFIB.

    People lobby for their specific interests, NOT interests of other groups. Of course these guys also know full well that NOBODY has the bargaining power of a multinational. If UPM doesn’t get what they want, its not from lack of trying. Plus, these guys know that taking a position on something like that is like staking a claim on a new refinery in St. John. It MAY help them, it may not, but it throws them into a political arena that may cost them support. It’s just not worth the risk-they rightly suspect that a new refinery won’t have anything to do with what they say.

    But lower taxes, thats different. If you had a business would you lobby to actually pay more, or a specious plan which MAY help you make more money, or at least not less. One is guaranteed, the other is not.

  2. Leanne Hachey says:

    CFIB is consistent in highlighting tax relief as vital to growing the economy of New Brunswick because our 4,500 members who operate businesses in New Brunswick, including Miramichi, consistently tell us that’s the kind of action they need from government to grow their business and, by extension, the economy.

    Surely CFIB members, the men and women who have taken a risk to open a business and employ New Brunswickers in all communities of the province, know better than most what they need to succeed.

    Chronic economic challenges have arisen in communities across the country, including New Brunswick, because the perspective of the small business owner is and was overlooked. Rather than continuing to improve the fundamentals that allow all businesses to succeed – large or small – through competitive taxation, a systematic approach to reducing barriers to growth like red tape, Mr. Campbell proposes trying to lure the big boys to the province as the cure-all.

    Correct me if I’m wrong, but was it not that very philosophy that got us into our current predictament: one-industry towns whose world is rocked when that one industry picks up and leaves – or shuts down.

    So, while a tax cut may only mean a cup of coffee to Mr. Campbell, it means a whole lot more to the small business owner. It would have meant a greater ability to increase wages, invest in employee training and improve productivity, little by little.

    To be clear, CFIB’s members are not only interested in economic growth, they’re the ones who make it happen, one job at a time. Now just imagine if each of New Brunswick’s tens of thousands of small businesses had the means to hire one more person.

    Isn’t that a cup of coffee worth drinking?

  3. nbt says:

    Diddling around with small biz tax rates while hundreds of high paying jobs disappear is silly.

    I say the opposite. Eliminate corporate welfare (i.e. business grants, loans and special concessions to individual business) which ultimately hurts small business initially and in the long run (because a greater portion of their earnings are diverted via higher taxes to hand picked government friendly firms and companies). Better to provide lower taxes that apply to all businesses than to continue distorting the playing field where government selects winners and losers.

    The most obvious example where taxpayers and investors were the end losers was UPM (as Mikel mentioned above). Five million was dolled out to this firm in 2006 without conditions attached (and in hope they would stick around and keep paying high wages regardless of success or failure). However, once these guys decided to pack it up and re-open in a region across the pond where taxes were flat, we {NBers] were left with little to show for it (other than small biz getting dinged because they are on the hook for these things).

    So instead of propping up big business via corporate welfare for the sake of keeping high paying positions in the province, why not lower taxes for all business (yes David, small biz too) and let the market decide who will survive and thrive in our province. At least then, companies with a bottom line of less than $400,000 won’t get punished right out of the gate for their efforts. And who knows, they may even surpass small biz status?? And once they do, government should make corporate taxes low enough (like they have in Ireland) so that there is a good chance of stronger growth over time. It’s better than writing them off completely because of the belief that SMEs will only survive if their umbilical cord is attached to multinationals.

    http://nbtaxpayers.blogspot.com/2007/12/on-upms-permanent-closure.html

  4. David Campbell says:

    Look, I am not anti-small business. I work for a small business. I have studied this issue in great detail and firmly believe the best way to support the small businesses in New Brunswick – 90% who rely almost entirely on the local market – is to stimulate more broad-based economic development. I am certain that when you poll your members they tell you they want tax relief. Of course they do. I want tax relief. But ask them how many new jobs, how much new investment will come from an average small business tax cut of a couple thousand dollars a year. That was the total extent of the Lord small business tax cut. How many new hires?

    Then ask your businesses – all things being considered – would they rather be in New Brunswick right now or Alberta? New Brunswick or British Columbia? If your members can’t see the link between overall economic and population growth and their own success, maybe you should do more to tell them.

    There is no way you will ever convince me that a Miramichi that is losing thousands in population -but gets small biz tax cuts – somehow is the optimal outcome for CFIB members.

    But, as I said before, I don’t intend to try and change your mind. The CFIB has been consistently pushing tax relief as its #1 issue – even when studies show that after the Lord tax cuts, NB small business performance was the second worse in North America.

  5. David Campbell says:

    NBT, my evil stepbrother, why do you keep serving up those cliches like “corporate welfare”? Is government investment in R&D “corporate welfare”? Is government investment in targeted training programs to turn out specialized workers for a niche industry “corporate welfare”? Is government investment in state-of-the-art business park/telecom infrastructure “corporate welfare”? Is government investment in the promotion of the province “corporate welfare”? Is the government creating the conditions under which we have competitive energy, tax and royalty structures “corporate welfare”? What is corporate welfare? Please tell me?

    Oh, and when you tell me, you can leave out bailing out bad companies – I agree that is corporate welfare.

  6. nbt says:

    LOL!! I like that last line brother. hee hee.

    To answer your question as best I can (without going into a long diatribe which will cut into my facebook time), I would have to say that corporate welfare is inherently bad at all levels (even $$$ to budding firms); but you are right, there are instances where some cases are much more hard to take than others. (i.e. repeat offender by the name of Atlantic Yarns in our neck of the woods)

    However, to put this into a better context for you (and even Leanne who doesn’t seem to have a grasp on why “one industry” towns shut down, just that they do), I’ll give you a quote from your favorite Industry Minister, John Manley, who has seen this stuff up close and personal before:

    “The problem with government intervention is not picking winners and losers; the problem is governments can never shake the losers. They sink big money into something and then they keep throwing good money after bad.”

    In other words, he is saying that once governments make these kinds of deals, they are bound for life, if not, they run the risk of having a company pick up and move to the next best offer, or in the case of UPM, the region with the best private offer and low taxes.

    Plus, market decisions initially are better made by the market and its investors (as I think Leanne was attempting to say) rather than by bureaucrats with no business experience. The proper function of the private sector (or market) is to direct investment to projects, industries or firms that offer investors the best and/or most secure rate of return. The difference between a sound investment and a poor one can be dire for a business (as you have reminded us with the rate of small biz failure), yet there is no similar discipline for government officials when using other ppls $$$ .

    Furthermore, when government makes the majority of the investment decisions and choices (statist intervention), the politicians may be doing so with re-election, a political backer or partisan donor in the back of their mind, so it ends up being based on less than sound economic judgement (i.e. like the Lord $5 million to UPM a few months before an election call).

    Bottom line: investment decisions should be based on financial reward versus risk. Government investment decisions are driven by political and geographical imperatives. Does that answer your question??

    I wanted to try and steer clear of just defining corporate welfare as “bailing out bad companies” because then we would be picking a winner and loser scenerio on what we thought the definition of corporate welfare is. lol

  7. David Campbell says:

    That’s a little more clear but we are still dancing around just what is a ‘good’ government expenditure from your perspective. I’m a bit strange because I don’t understand monopolistic government health care. I don’t really understand the case for a lot of government spending but I do see the case for spending on things that make us a receptor for business investment. I guess you are what you eat.

  8. nbt says:

    True, which is why (as you have mentioned millions of times on this blog) government should find ways to reduce health care spending.

    Maybe for starters they could outsource non-essential services such as food preparation, security and cleaning in hospitals. British Columbia is saving $66 million in the health sector annually with private outsourcing. just a thought.

    I mean honestly, with 43 cents on every dollar dedicated towards health care, what do we have to lose.

  9. Anonymous says:

    I think we need a healthy balance of small business and big employers.

    Small business is good for the economy and the odd one will grow to become a medium or maybe even large business; but this takes time and is a low probability bet. Our economy and standard of living will not be very good with a small business monopoly. Not many of our local coffee bars will franchise into a Tim Horton’s chain. And, to David’s point, the odds of success are far improved with the catalsyt of a larger business.

    We desperately need a balance of some large employers that,in NB, will dominate a town or city. Our tiny size does make us vulnerable and that is not limited to rural NB but large business plays a vital role in our export economy and are critical to growing our wealth.

    Attracting these large employers is not really a game where NB has the luxury of defining the rules. These are globally sought after gems that are offered tax breaks, land, training, etc; we have to compete when we see an opportunity that is a good fit for NB. If naysayers want to label this corporate welfare, so be it. I will vote for a government that is willing to pursue strategic business opportunities that will grow our economy as long as they minimize the politcal aspects mentioned by a post above. I much rather see $60M spent to attract a company like Michelin Tire than to bail out a Caisse for political gain. Yes, not all ‘Michelins’ will prosper but at least there is a chance.

    Encouraging growth of both small and large business 1)is complementary and 2)requires two different approaches. The debate should not be about picking one or the other; we need both.

  10. Anonymous says:

    I was told 40 years ago in Montreal,don’t buy NB potatoes and me just off the farm.Nothing has changed since.
    Experts are So funny.They only have to go to Peru,to learn how to do it.
    Peru,inventor of the Potato.

    New Brunswick potato producers and exporters are not making the most of its vast potential, said a expert in the potato seed industry.

    David Thornton, officer in charge of Bon Accord Seed Potato Farm, opened the second day of the 2008 Potato Conference and Trade Show in Grand Falls by posing an important question – Is New Brunswick missing the export boat