Tax load: Time to help the economy
The Windsor Star
Wed 28 Sep 2005
Page: A8
Section:
Editorial/Opinion
Byline:
Source: Windsor Star

The federal Liberals are delaying much-needed and
promised tax cuts even though Canadian businesses are labouring under high and
punishing taxes compared to their competitors in other industrialized nations.

The Liberal flip-flop on corporate tax relief - actually a flip-flop with a
reverse double twist - might help secure the minority Liberals the continued
support of the New Democrats in the House of Commons but it will also continue
to cost this nation in terms of its productivity and competitiveness.

The Liberals promised corporate tax cuts last February but then stripped them
from the budget to secure the support of the NDP. Under pressure from a business
community struggling to compete internationally, the Grits vowed to reintroduce
the tax cuts in a separate bill but have backed off yet again to ensure
continued NDP support during the fall session.

This gymnastics routine might help Prime Minister Paul Martin extend his
stint at the helm but he'll be the captain of a listing economic ship, weighed
down by taxes that discourage investment and innovation and encourage businesses
and the jobs they create to relocate in other jurisdictions.

A report released last week by the C.D. Howe Institute concluded Canada's effective tax on business
capital averaged 39 per cent in 2005, the second highest among 36 industrial and
leading developing countries. The tax rate was only lower than Communist China,
a nation hardly renowned for its progressive polices.

"Despite the past and planned cuts in corporate rates, Canada will retain a
burdensome tax climate for investment, undermining its prospects for robust
economic growth - unless governments act," said the study.

The C.D.
Howe study followed a Canadian Chamber of
Commerce report released earlier this month that likewise concluded Canada's
excessive corporate tax rates placed it in an uncompetitive position
internationally. The chamber called for broad tax cuts to ensure continued
economic growth and prosperity.

"A lower general corporate income tax rate would put Canada in an even
stronger position to attract businesses," said the Chamber report. "Expanding
business means more capital equipment and machinery, new technology, new
products and services and more jobs."

While it is easy for the average Canadian to appreciate the benefits of
personal income cuts, it is harder for them to appreciate the benefits of
corporate tax cuts because the dividends are indirect and general. There hasn't
been a federal initiative to cut personal income taxes since 2000 but when those
taxes are reduced, Canadians start taking home bigger and bigger paycheques and
have more and more disposable income to spend on themselves and their families.

But Canadians don't see the same sort of immediate payback when corporate
taxes are reduced. What they will see, though, is more and more businesses
opening up and expanding in their communities, the creation of more and more
jobs and a bigger economic pie for everyone in the country which, in turn, will
ultimately result in a better quality of life and a reduced personal tax burden.

It's easy for NDP leader Jack Layton to score political points by decrying
tax cuts for corporations, but it's a shame the minority Liberals don't have the
political courage to call his bluff and do what they said they would do.

The government promised corporate tax cuts in February's budget because they
knew those cuts would be good for the country. They scrapped them when they
found out they might hurt the Liberal Party.

Edition: Final
Story Type: Editorial
Length:
569 words