Incentives Galore!

A recurring theme on this blog is the subject of using taxpayer dollars to lure industry either through tax breaks, grants or other investments. The commentary ranges from outrage to gung ho support. My own opinion, stated many times, is that they are a necessary evil. Other jursidictions pile on the cash, why should New Brunswick miss out on good economic development opportunities on some principle that very few jursidictions (if any) adhere to?

But I have to reiterate that my preference would be that all jurisdictions in North America would agree to scrap these tools.

I heard a long discussion on the CBC’s The Current this morning about the tax incentives used to attract film production to Canada. I don’t remember the figures but between the provincial and federal governments it is in the tens of millions each year. The industry indignantly claims that while we lose out on tens of millions, the net economic benefit is positive so we should continue to subsidize. The same argument is used for all the heavily subsidized industries in Canada – agriculture, automotive, aerospace, film and oilsands development (probably the largest recipient of incentives other than agriculture). The problem with this logic is that if every industry got involved and demanded their 30% or 40% tax breaks (or equivalent in grants, etc.), then governments would be hard pressed to raise the dough to pay for public services.

Now the argument is that the heavily subsidized industries are transient – that is, if you don’t give them the goodies, they will go to another country. And there is truth to this. But there are also industries that are locating places just because it is a great place to locate. Although good examples of that are slipping.

I guess ultimately my biggest beef is that all the big government gravy train industries -agriculture, automotive, aerospace, film and oilsands development – aren’t in New Brunswick. The province that needs development arguably more than any other – and all the big tax breaks don’t apply. In New Brunswick, we give a few grand to call centres, or a couple of hundred grand to a SME or two. For awhile we were doling out the cash for the fishery but I don’t how much of that goes on these days.

No, ultimately if you want the big bucks, you go to Quebec or Ontario (specific sectors of course), British Columbia if you want to do computer animation – there’s a lucrative package awaiting you there. If you want to set up aerospace, Quebec will open the vault and the oilsands, well the tax/royalty incentives put up by the provincial and federal governments were to stimulate development at $50/barrel oil – we are now at $100.

But tax breaks/grants are like anything else, I guess. Industry gets used to them. Prices them into their business model. Share prices adjust to reflect them if they are large enough. The guys making $100k+ working in the oilsands owe some of that cash to tax breaks, I guess.

In conclusion, I think New Brunswick needs to find its own gravy train industry. The feds have put over a billion into sustainable, green technologies through a specific fund – almost all in the Greater Toronto Area. The famed Technology Partnerships Canada has doled out over $6 billion – almost all in the Toronto to Quebec City corridor. The film development incentive programs are almost exclusively used in Quebec, Ontario and British Columbia. Agriculture incentives (including the biofuels $1 billion) are also heavily concentrated. We all know where the vast majority of government R&D spending goes.

We need a gravy train industry. One that soaks up government dough and tax breaks but is concentrated in New Brunswick.

Sounds weird, doesn’t it?

But am I wrong?

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0 Responses to Incentives Galore!

  1. Anonymous says:

    off-topic, but I thought you might be interested:

    UNdata: A World of Information

    The DESA Statistics Division has just launched a new internet-based data service for the global user community. It brings UN statistical databases within easy reach of users through a single entry point. Users can search and down load a variety of statistical resources of the UN system.

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    http://data.un.org/

  2. Anonymous says:

    You can’t be ‘wrong’ about such a position, its simply a political choice. However, even as a youngster we were often taught that the ‘but everybody else is doing it’ is pretty flimsy.

    However, the central point to be made is the assumption that New Brunswick doesn’t already do that. We know from industrial decisions-potash, bennett environmental, factory farms, nackawic, molson, bell canada, this latest bridge building thing, etc., that the the problem is NOT that NB is ‘not trying’.

    Perhaps they are ‘not trying hard enough’ and so only getting the lousy pickings, unlike Nova Scotia. That’s a disputable point.

    However, pick up the book ‘jobscam’ from the ‘goodjobsfirst.org’ publishers. This is a very good book on how corporations use economic development to whipsaw governments into the lowest bid.

    There are guys whose entire job it is is to lower those bids-often corporations already know where they are going but just use the process to get more incentives.

    With the canadian dollar at parity and with such low levels of R&D development, plus slave labour in central america and asia, well, lets just say the prospects are not looking rosy.

    But thats an important policy decision and one that I think should be made democratically through a referendum. On the opposite side of that spectrum is our friend nbtaxpayer who advocates low corporate taxes and getting rid of loopholes and incentives.

    I mentioned years ago (wouldn’t want anybody to think I’m riding NBT’s coattail) that an intersting policy decision would be ABOLISHING corporate tax altogether.

    Lots think that that is anathema, and I see their point. But hear me out. The feds WANT low corporate taxes. Currently, as readers of this blog know, corporations only contribute 3% of the budget anyway. That’s something like 200 million. IF the feds can be counted on to cover that for, say, two years, then that may be an interesting policy decision. Of course it would have to be tied to labour growth, otherwise there is no point, but its an interesting idea.

  3. Anonymous says:

    All the focus here has been on the large federal funding support for Ontario and Quebec’s gravy train industries.

    Don’t forget that entire federal departments were formed to support these sectors. Policy, legislation, trade agreements and taxation were developed to support them. Major federal research labs and testing facilities were developed. Export programs and offices were developed to support them. Universities were funded and so on.

    The point is, support for these gravy train industries is more than just handing over direct funding money. This is why the few crumbs that fall out of Ottawa and land in places like ACOA are not enough to make a difference; they are only enough for ON/PQ to label us as have-nots.

    We need, sustained, structured economic development support that encompasses more than just funding.

  4. David Campbell says:

    I posted this last year but I just got an email about it again. It is posted mainly for your amusement and NBT’s heartburn:

    Press release. / Communiqui
    {Message en francais ci-dessous)

    Canadian Subsidy directory (2008 EDITION)

    Legal Deposit-National Library of Canada

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    FRANCAIS

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    *********************************