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.