Expect PM to toss us a few tax-cut
crumbs
The Vancouver Sun
Thu 22 Sep 2005

Page: C3
Section: BusinessBC
Byline: Michael Campbell
Column:
Michael Campbell
Source: Vancouver Sun

Okay, so it was the easiest prediction of the year, but
as advertised in this space some months back, the big dance between business,
the media and the Liberals has begun. On script, Paul Martin is hinting about
tax reductions as we lead up to another federal election.

He hasn't made any specific promises, because then the media would have their
story and move on. Instead, it starts with the hint of tax relief made in a
number of public appearances, and of course each time the PM's comment will get
reported. Next will come the leak of a few specifics, which are again designed
to maximize the media impact. And finally, Ralph Goodale will deliver the
details in the fall's mini-budget, to the salute of various business groups who
will give the thumbs-up to another round of meagre tax reductions.

Once again, the majority in the media and the business community will
celebrate the myth of Paul Martin's fiscal prudence. The fact that he recently
increased spending -- by $23 for every $1 of tax relief -- and cancelled the tax
reductions for business promised in the last budget in order to curry favour
with the NDP will be conveniently overlooked.

In the meantime the federal government's tax take will continue to reach
record levels, while Jack Layton and the NDP will complain it's not enough. The
Conservatives, fearful of being labelled extremist by a media that consistently
grades federal budgets only by the amount of new spending, will say they
wouldn't do much different other than tinker with gasoline taxes.

Organized labour will decry any business tax reductions, while at the same
time the CAW's Buzz Hargrove lobbies for de facto reductions in the form of
subsidies for the big-three automakers. As I have said, it's all so predictable.

But I have to admit, this time I hope I have it wrong.

Just once I would like the federal Liberals to aspire to more than
mediocrity. Maybe this time prominent business groups could demand more than
uninspired policies to which they consistently give a passing grade, yet result
in Canadian investors paying the second-highest taxes among 36 industrialized
nations. Better still, after a decade of complaining about low productivity and
uncompetitive taxes, maybe this time they could demand immediate action instead
of being bought off by promises of minor changes three years out.

As a report released Tuesday by the C.D. Howe Institutes
makes clear, the link between tax rates and economic growth has been recognized
by left- and right-wing governments throughout the world. Many Canadians still
don't seem to understand that corporate income tax makes up roughly only a third
of the total business tax burden.

Businesses pay capital tax, sales tax on business inputs like the purchase of
equipment, and payroll taxes, whether they're profitable or not.

The current commodity boom has helped cushion some of the negative economic
impact of this onerous tax burden, but that boom cycle will end. And when it
does, my bet is that we'll regret not aggressively addressing these issues.

Michael Campbell's Money Talks radio show can be heard on CKNW 980 on
Saturdays from 8:30 a.m. to 10 a.m.

Edition: Final
Story Type: Business; Column

Length: 530 words