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Keep business tax relief: Use it to reduce corporate welfare

By Kevin Gaudet
web posted February 7, 2011

All of the opposition parties in Ottawa appear to be setting up for another election. This time they are using the government's commitment to competitive business taxes as their excuse. They are attacking the Harper government's business tax relief, demanding that business taxes be hiked. Instead they should be attacking wasteful corporate welfare using the tax relief as the perfect excuse to do so.

An effective political strategy always has been to direct anger towards an external enemy. That is why business bashing is a favoured sport of many political parties, and especially when the economy has been suffering. That is what we are seeing today in the sudden attacks on more competitive business taxes.

For example, Liberal leader, Michael Ignatieff, recently questioned, "when will government stop giving help to corporations that do not need help in the first place."  Great question, but he was referring to competitive business taxes for all businesses and not corporate welfare, sadly.

A few things are peculiar about this. The Harper government has been increasing handouts for business since they came to power. They have increased the number of so-called regional development agencies, having added one in southern Ontario and one in northern Canada. They have also poured more cash into the budgets of all of these agencies.

Opposition parties have said nothing critical about this.

The Harper government has increased handouts to corporations through new and increased spending programs for mining, forestry and aerospace, for example; not to mention the $12 billion bailout of GM and Chrysler.

Opposition parties have said nothing against these direct handouts to corporations.

The Harper government has been moving forward on making business taxes in Canada competitive with other OECD nations. The latest reduction took effect January 1st, when the business tax rate was lowered to 16.5 per cent. The final reduction is scheduled for next January, to 15 per cent.

In a strange about-face opposition parties now decry these tax relief measures they allowed to be passed into law. Mr. Ignatieff, Mr. Layton and Mr. Duceppe are now, instead, demanding that business income taxes be hiked back to 18 per cent.

This is of course on top of this year's Employment Insurance payroll tax hike - $780 million for business and $520 million for workers.

Despite opposing tax rates they deem "help for business," currently opposition parties continue to support corporate welfare handouts and demand tax hikes because they believe it is better for government to pick who gets the cash; when, what region, what industry, what firm, which friend.

If the goal of the opposition parties is to take money away from businesses and/or to help free up dollars to balance the budget, according to the Fraser Institute there are at least $5.6 billion dollars of corporate welfare that go out the federal spending door each year.

It's also important to remember that businesses don't pay taxes, they collect them.  Who pays the bulk of them? Consumers, including seniors! The very people Jack Layton and Michael Ignatieff claim they want to direct support towards while raising businesses taxes.

Businesses deserve to compete on an equal playing field where politicians don't pick winners and losers. Lower taxes help business get there, to be more productive and competitive. Hiking their taxes while dishing out corporate welfare won't help. It'll hurt.

But business too shouldn't have it both ways. They can't both expect lower taxes and access to subsidies, grants and no-strings loans. The federal government should keep up its approach to making business taxes internationally competitive. They should just cut off the subsidies while they are at it. ESR

Kevin Gaudet is the federal director of the Canadian Taxpayers Federation. © 2011, Kevin Gaudet

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