Layton & Ignatieff’s corporate tax increases would hurt economy

It’s called biting the hand that feeds you or a double edged sword. Jack Layton, leader of the NDP recently suggested, for example, giving small businesses a tax break while both he and Liberal Leader Michael Ignatieff also said that a coalition government between the two parties would raise corporate tax rates to pay for their election promises.

Well, they can’t give with one hand and take with the other and not hurt the very people they say they want to help. Because, contrary to what progressives say constantly, corporate tax cuts are NOT just for some large corporation abstraction.  They not only pay dividends to shareholders and high salaries to executives, they hire and pay thousands of regular employees with real families and real financial responsibilities. Moreover, corporations are also medium-sized businesses, as well as small and mom and pop operations.

So, the NDP and Liberal opposition should be careful what they are promising and Canadians should be careful which political party they support. While it is true that the Conservative government, under the leadership of Stephen Harper, was not perfect, as no government is, its stimulus and fiscal policies have resulted in Canada coming out of the recession in the best fiscal shape of all the G7 nations.

As Sharon Singleton wrote at money.canoe.ca earlier this week on March 30th:

Layton, speaking on a campaign stop in Oshawa, Ont., said if he’s elected his party will cut the tax rate for small businesses to 9% from 11%. He will also give a job creation tax credit to all companies of $4,500 per new hire. On the flip side, he’ll up the tax rate for bigger corporations to 19.5% from the current 16.5% rate.

‘This is presented a little disingenuously,’ said Catherine Swift, president of the Canadian Federation of Independent Business. ‘It’s not just the big banks, but an awful lot of medium-sized companies that will also be affected by the tax hike. It’s not as if we’re low balling here,’ she said, adding Canada’s overall corporate tax rate is in line with that of its industrialized peers.

Swift said she welcomed the focus on the small business sector, but said the CFIB also supports the current government’s attempts to trim Canada’s overall tax rate. Corporate taxes are scheduled to fall to 15% in 2012, a cut slammed as wasteful by opposition parties.

[Yet] small businesses make up the backbone of the Canadian economy, with 98% of companies having fewer than 100 employees, according to Statistics Canada figures. As of 2009, small businesses employed about 5 million people, making up about 48% of the total labour force.Companies with fewer than 50 employees contribute about 29% to the country’s overall gross domestic product.”

The crux of the matter is, then, that any small business tax breaks recommended by Layton, are undermined by both his and Ignatieff’s promise to raise the corporate tax rate from its current 16.5% to 18% or higher — essentially a double edged sword. Moreover, by penalizing the same businesses that employ Canadians, they are biting the very hand that feeds the economy.

Update: Here is an excellent article by John Ivison on a related topic (H/T Joanne and Richco) titled: “Ignatieff plucks another billion from the money tree.” It is about how Ignatieff and Layton seem to forget who creates the wealth in this country. Yes, education is important but once you have your education, you need a job. And, of course, tacked on to that reality is the importance of free trade with other countries.  In other words, both opposition leaders seem to be anti-wealth creation.

19 thoughts on “Layton & Ignatieff’s corporate tax increases would hurt economy

  1. But, but…surely it was the groundwork laid by Paul Martin that allowed us to weather the economic storm! I heard a Liberal say it so it must be true.

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  2. Why are the media failing to ask about low interest Credit cards and how our corporate rates in the middle of the OECD.

    I can’t find any economists that back up the NDP-Liberal attack on “rich” companies.

    After the bailouts for the Lumber and auto industries how can they talk about banks and oil.

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  3. Well, dwc, whatever ground work former governments have laid, that was before the 2008/09 recession and if the coalition partners have their way, will be covered over with good intentions in short order.

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  4. CanadianSense — I have wondered the same thing re their attack on “rich” companies. Isn’t that what a country wants and needs?

    I mean, the auto bailouts maintained thousands of good paying “UNION” jobs.

    Truly, puzzling why Layton and Ignatieff both seem to think that “profit” is a dirty word. Our pay cheques are profit for us and our families. Even non-profits make money. They simple hire more people or pay people more or buy more resources. It’s profits, corporate, agency or personal, that keeps our lives and our economy going.

    Truly, some progressives seem to live in a world of idealism and magical thinking.

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  5. Ignatieff has the same ideology as his sometimes/clandestine coalition partner Layton, they assume money comes from the sky.

    What kind of thought process would come up with an idea to tax to death the industries/employers who fuel the economy by keeping people working? I sometimes wonder if Ignatieff and jack are channeling Maurice Strong from his hidey hole in China. Isn’t it his ambition to shut down the industrialized world? Not sure if that includes China, his favourite haunt.

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  6. The other thing that troubles me about the Progressives is how they treat corporations as if they are a personal piggy bank that they can dip into whenever they need to finance their pipedreams. This is nothing better than looting. It assumes ownership over someone elses assets. This is one of a myriad of reasons I could never vote Progressive. Their attitude towards wealth, particularly other peoples’ wealth, is fundamentally unethical.

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  7. Who will decide what is a large corporation and therefore taxed higher and what is a small business and therefore not taxed? Where is the line? Are we going to need a whole new bureaucracy to look after, more this? Just what we need, more overpaid public servants.

    Is It Just Me

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  8. I am appalled by the fiscal irresponsibility implicit in the Liberals social spending promises. If carried out, these programs would amount to the biggest spending initiative since the days of Pierre Trudeau, another intellectual indifferent to fiscal realities. I suspect these ideas spring from the NDP branch of the Liberal party.
    The majority of the programs also happen to be in areas of provincial jurisdiction.
    I don’t often agree with Quebec, but I do believe provinces are better able to administer areas like health, welfare and education.
    Liberals who get starry eyed over the Charter portion of the 1982 constitution, don’t appear to care so much for the rest of the document.

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  9. “Corporations don’t pay taxes; their customers do.”

    Corporate taxes are clandestinely passed on to consumers. Socialists have used this technique to tax everyone indirectly for many decades.

    The Liberals and NDP are on the same page here and in most other aspects, too.

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  10. The opposition seems to be mimicking the Obama economic model.
    How well is that working anyway?

    Lets use this as an example of liberal disengenous action. ON the one hand Iggy says he will make his number one priority the loan application for Diamond Aircraft. He stops short of actually promising to approve the loan, so he lets his proxy Glen Pearson make that pledge for him. Interesting that it doesn’t dawn on the media that while promising to make this a top priority, the liberals have also promised to rescind the corporate tax cut, thereby proposing to increase operating costs on Diamond (operating costs that would be covered by the loan). Nice scam, corp applies for loan, government increases tax and recoups money from loan plus puts corp on the hook to repay loan.

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  11. Ignatieff is pulling a page from the McGuinty playbook. Promise everything and deliver nothing after. People should be reminded of this similarity.

    I’m surprised that no-one has picked up on the fact that pension plans [teachers, OMERS etc.] rely on these evil banks and money-making corporations to increase the value of their plans.
    Why not ask the liberals and NDP why they feel that the money they’ll get from this tax increase,[and remember that the scheduled tax decreases were approved in the previous budget] is better in their hands and not better with the corporations and banks to be more valuable to fund managers? Why do they want to suppress the value of my retirement fund? I would think I’d rather see an increase value in my retirement fund than to see money be dispensed through a liberal gov’t sieve to nebulous programs.
    I want banks and corporations to make money. The more the merrier. I won’t be envious, I’ll be owning a piece of them and enjoy the ride!
    Also I’d like to hear someone remind Jack Layton that he is in the top 1% of income earners in Canada.

    P

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  12. Our economy is humming along nicely, our dollar is above par, could this mean the markets are confident we will elect a majority Conservative government?

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  13. I think you folks should get out and mingle a bit more with Canadians. Corporate tax cuts plus wasteful government spending on jets and prisons is quite unpopular in the polls. The Tory base loves them of course but most Canadians do not.

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  14. Doug;
    When you look at the timeline and the overall cost of the jets, it’s about 1 billion / year. Wasteful? How much is it again we spend on the CBC? Of course the CBC is making a stellar case for it’s continued existence right now. I know what I’d rather pay for.

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  15. The Liberals are also planning to buy a fleet of aircraft, although what type, the number and the cost are all unknown.
    That “jet” thing is a wash for the Liberals; they’ve only been able to milk it thus far because the media didn’t ask Iggy for the details of his plan.

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  16. All sorts of Canadians, either directly or indirectly, are owners of the corporations benfitting from the corporate tax cuts; heck I suspect you’d find some big holdings in the teacher pension plans. Does it follow, then, that they’re declining the cuts? Then you add in the number of Canadians who actually work in the corporate sector and I suspect you’d find the issue is far more complex than some see it.

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  17. StatsCan says today there is no connection between cutting corporate ta rates and investment. They say governments have been cutting corporate ta rates for years now but the corporations refuse to invest in new plant and equipment or in jobs. They just take profits and live well.

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  18. Doug — Given the Canada has created 350,000+ jobs in the last year, obviously some corporations are investing in new jobs. Sounds like StatsCan is hoping the Tories get defeated like so many other lefty organizations. Not going to get into a silly discussion like this. Heard the same crap during Harris years — after 700,000 jobs had been created and 100,000 got off social assistance and into full-time jobs. Same old, same old.

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