Breaking the corporate tax taboo

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Canadian-based corporations are sitting on lots of excess cash. Many Canadians are looking for work, better jobs, or more hours. Large-scale public expenditure is going unfunded: shortages exist in infrastructure for urban transit, education, public health facilities, recreation, and culture.

The Harper Conservatives plan to give the corporations a tax reduction in the next budget, so they will get even more money to sit on. Will Canadians be better off because corporations pay income tax at a lower rate? Somebody must have thought so, because corporate taxes have been reduced over the last 10 years in Canada

Saying enough is enough, both the Liberals and New Democrats have called for the next round of corporate tax reductions to be withdrawn by the Harper government in its upcoming budget. Putting corporate tax dollars to work to create jobs, and boost national income is what is most needed to ease economic hardships facing many Canadian families and individuals.

The first public figure to come out strongly for actual increases to corporate taxes is Adrian Dix, British Columbian MLA for Vancouver-Kingsway, and a high-profile candidate to become the next leader of the B.C. NDP. In his campaign kickoff, Dix broke the taboo about the supposed greater good for a greater number that comes from continuously reducing corporate tax rates.

In B.C., the Liberals have been shifting taxes away from companies and onto individuals and families (adopting the HST and a carbon tax), and eliminating corporate taxes all together (capital taxes). Dix wants the B.C. NDP to restore the last three previous corporate income tax reductions.

The province needs the money for public services. New public investment fills a number of gaps. Making such expenditures will increase employment in construction, and create long-lasting well-paying jobs, as well as help the B.C. government meet the pressing needs of its citizens.

Establishing a Fair Tax Commission so that citizens can see more clearly what are the advantage of disadvantages of the various tax options the province has available to it would help make Dix's ideas more accessible to rational debate. With the corporate propaganda pump working overtime in highly polarized British Columbia, the NDP needs a fresh supply of research-based policy proposals, if only to rally its own supporters.

How hard is to explain that it is not necessary to reduce corporate tax rates further? Maybe not so hard as conventional wisdom suggests. The idea is that corporate tax cuts create jobs. But corporations already have enough money to create additional employment in Canada without further tax cuts.

The truth is that Canadian-based corporations do not deserve additional tax reductions. Corporations create air pollution, add carbon to the atmosphere, take nitrogen out of the soil, spoil ground water, and cause environmental illnesses. All these activities require public money to clean up and treat. Current levels of corporate income tax are insufficient to pay for present and future costs to the environment (and to Canadian wellness) of corporate practices in production, and exploitation of natural resources.

As corporate tax rates go down, the law of diminishing returns suggests any arguments for reducing them further, get weaker. Additional reductions are faith based. In Ontario, opponents have turned to ridicule and satire to make their case.

The Harper Conservatives favour reductions in all sorts of tax rates because they believe in smaller governments. This is part of the faux populist message first brought on to the public scene in Canada by Preston Manning and the Reform Party. It was picked up and implemented in Ontario by Mike "the tax fighter" Harris. As Les Whittington pointed out in the Toronto Star, the tax breaks brought in by the Harper government since being elected in 2006 "will result in foregone federal revenues of $220 billion between 2007 and 2013. Of that, $60 billion in tax savings go to Canadian corporations."

When corporations get access to extra money, and workers are deemed surplus to current needs, you have the very definition of a continuing economic crisis. The Conservatives believe the economy will right itself, that governments just have to get out of the way. The truth is that tax cuts mean public needs go unmet, inequality increases, and the capacity of governments to create jobs is weakened.

Duncan Cameron writes weekly on politics and is president of rabble.ca.

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