Are corporate tax cuts the sharp tooth that will finally puncture the Teflon hide of the Harper government, letting an ugly illusion bleed out?
The opposition is threatening an election unless the upcoming budget puts an end to the cutting. If there’s any question on which society as a whole should say “enough,” this is it.
Properly translated, the government’s official nonsense about stimulating the economy would read like this: We will deepen the deficit and deprive the country of infrastructure and social spending in order to advance the worldwide cult of billionaires ascendant, in the hope that they’ll leave us a few crumbs.
The nonsense runs deep and persists despite being thoroughly debunked. One of the debunking forces is the government’s own Finance Department, whose figures show that cutting taxes is one of the poorest ways to create jobs, giving 20 cents growth for every dollar of taxes cut. Spending on infrastructure, on the other hand, gives $1.40 per dollar spent, and supports for the unemployed and the poor also around $1.40.
Plus, the Canadian Centre for Policy Alternatives has shown this: Corporate taxes have dropped from 28 per cent in 2000 to 18 per cent in 2010, while business investment per GDP has stayed exactly the same. In fact, it has hardly budged since 1981, the first year data on business investment were recorded, when the federal corporate tax rate was 36 per cent. In the 1960s — prime time for industrial expansion in Canada — the rate was 40 per cent! The rate is due to drop to 16.5 per cent this year and 15 per cent next. Measured from 2007, when the rate was 22.12 per cent, the loss annually by next year to the Canadian treasury will be $13.7 billion.
Meanwhile, it has also been pointed out that since a large part of Canada is foreign-owned, a Canadian cut in their taxes is just a minor bit of bookkeeping for corporations that see this as their due, hardly worth sending a thank-you note to the Canadian taxpayer who will pick up the tab. As is also known, taxes are just one of many factors that lead corporations to invest, or not.
And many a credulous, manipulated or ideologically driven government has ruined its public finances by chowing down on neo-con propaganda about tax cuts that dates back to the Reagan-Thatcher era. New Brunswick is one. So are the U.S. and Ireland, to name a few. Need we all go over the cliff?
But this is not just about the best way to stimulate the economy. It’s about whom our governments serve — the public interest of democratic nations, or that of a swiftly rising global aristocracy of money. This new nobility’s power and reach was revealed in the U.S. recently as even the outrageous Bush tax cuts couldn’t be allowed to expire, thanks to a “grassroots” political movement actually funded by right-wing billionaires.
Meanwhile, the stock markets are booming again and Wall Street, fresh from sinking the world economy, is back to giving itself billions of dollars in bonuses, as is Bay Street, while the real economy doesn’t move, and in fact the signs are still that more and more people are falling into poverty. An article in the current Atlantic, entitled “The new ruling class: How the global elite is leaving you behind,” reports that there’s a strong sentiment among them that if the middle class is falling behind, tough. I made billions, why can’t they? Call this the Marie Antoinette school of economics.
Many among this growing legion of billionaires are new money. The founder of Facebook, a 26-year-old worth nearly $30 billion overnight, is held up as an example. A small idea that went viral, economically it created nothing. It just sucked it out of somewhere else. The question: Do guys like this need a tax cut?
Granted that some in the hyper-rich set are seeing the dangers and, as in the 1920s, turning to philanthropy, at least in the U.S. — led by Bill Gates and Warren Buffett. Philanthropy takes the edge off, but is no substitute for sound public finance.
In terms of the dynamics of the upcoming budget and whether the opposition should or will defeat the government on it, that falls into the ambiguous muddle of our minority politics. The best solution for the moment would be for the Harper government to back off and suspend the cuts. But good luck with that. According to the latest news, the Conservatives are gearing up to spend $6.5 million to promote their tax cuts.
The polls tell us that as many as nine in 10 Canadians believe these cuts have gone far enough, if not too far. However, if this view does not move relative support for the parties, leaving the likelihood of a result much as we have now, we have a failure of public will, and the fractured opposition will have no choice but to muddle through as usual. If Harper and his new world order are allowed a free romp on this one, it will be another sad note attached to the state of our democracy.
Ralph Surette is a veteran freelance journalist living in Yarmouth County. This article was originally published in The Chronicle Herald.
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