Greed, apparently, is still good. Or so we would have to conclude by Bay Street’s tax-cut cheerleaders who are falling over themselves to say that Canada will almost certainly have to copy George Bush’s tax cut package. If not, the consequences will be grave, Canada will suddenly be less competitive, investment dollars will flow south, yadda, yadda.

That these people can argue this with a straight face is amazing only if you discount the power of the rich imagining themselves getting even richer. The big ticket item in the new Bush cuts (nearly half the total of $674 billion over ten years) is the proposal to eliminate the tax on dividends paid to investors. According to the Urban-Brookings Tax Policy Centre, a research body in Washington, fully forty-two per cent of the benefit of this cut will go to the top one per cent of tax payers. The same gross inequity would result in Canada — as if Canada’s wealthy needed another break. Paul Martin’s last round of tax cuts — $100 billion over five years and the largest in Canadian history — saw seventy-seven per cent of the total personal tax cut benefit go to those earning over $65,000.

Not a single self-respecting economist believes that handing over truck loads of extra cash to the already-giddy rich will stimulate anything other than more greed. The multi-millionaire set is already having difficulty spending their money, even with the availability of $6000 shower curtains. The sole result of such a move in Canada would be a huge loss of revenue, period. In fact, the recent history of tax cuts, from Ronald Reagan’s on, show that is virtually all they do — witness B.C. with a projected $4 billion deficit this year, the highest in its history, and due largely to Gordon Campbell’s tax cuts (fifty-three per cent went to those earning over $60,000). The U.S. deficit could hit $300 billion this year — a new record.

It shouldn’t be necessary to remind anyone that these same analysts spent most the 1980s and 90s in a state of high anxiety about deficits. I guess deficits to finance tax cuts are just fine; deficits to address child poverty, are not. But the principal argument of those clamouring for dividends to be tax free is that if we don’t, Canada will somehow be“uncompetitive”with the U.S. This Bay Street mantra is intended to spook everyone into making even more sacrifices to“investors” and the health of the abstract “economy.”

Yet all these financial analysts know perfectly well that Canada wins the competitiveness contest with the U.S. hands down. Since 1997 the international business consulting firm KPMG has done yearly, in-depth comparisons of business costs in eight countries in North America, Europe and Japan. In every year, including 2002, Canada has come out number one — and by a wide margin over the U.S. According to KPMG “Canada is the overall cost leader for 2002 with a….14.5 per cent cost advantage over the United States.” Canada beat the U.S. in all major business cost categories: labour, employee benefits (largely due to Medicare), investment, electricity, and telecommunications costs and — lo and behold — taxes.

As for cutting taxes on dividends paid to investors, this has nothing to do directly with real productive investment. It has to do with speculative investment in the casino economy. The net effect would be that some Canadians might shift their speculative investments into those companies offering dividends from those that don’t. Just how this would help the Canadian economy is a mystery. Ironically, the indirect effect might be to undermine business investment if companies felt pressured by the stock market to pay dividends rather than spend earnings on long term capital investments.

It used to be that Canadian tax cut promoters whined about our corporate income tax. But they can’t do that any more, because Canada’s corporate tax rate is now twenty-three per cent (headed for twenty-one per cent in 2004) while the U.S. comes in half again as high at thiry-four per cent. And for all the talk about taxes and investment ask any CEO in the privacy of their office and they will tell you that taxes are well down the list of factors determining where and when they invest in new productive capacity. A highly trained workforce, access to markets, energy price stability, strong infrastructure, actual demand — all come in ahead of taxes.

None of this will stop Bay Street, preoccupied with its millionaire clients’ interests, from demanding tax cuts for them whenever the opportunity presents itself. As a sub-culture they seem to have an almost pathological hostility to Canada’s national interests. There were no comments from Bay Street suggesting Canada mimic the hand full of Bush tax measures that actually were simulative — the $3,000 grants to the unemployed for training or childcare to help them find jobs, for example. We could be forgiven for concluding that Bay Street would prefer that Canada fail.

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Murray Dobbin

Murray Dobbin was rabble.ca's Senior Contributing Editor. He was a journalist, broadcaster, author and social activist for over 40 years. A board member and researcher with the Canadian Centre for Policy...