On January 1, 2012, Canada’s combined federal and provincial corporate tax rate fell to 25 per cent, the lowest among G20 nations. The U.S., by comparison, levies a combined corporate tax rate of 39.2 per cent. Supporters of Stephen Harper will tell you that this is his most measurable achievement since taking office.
In spite of facing minority parliaments for his first two terms as prime minister, he has steadily reduced corporate taxes, thereby stimulating the economy and creating much-needed jobs for Canadians. When a corporation saves money on taxes, so goes the narrative, it spends more on infrastructure, training, and research and development, and everybody gains.
Sadly for the prime minister’s plans, Canadian corporations don’t seem to be playing the game. Last week the Globe and Mail reported that, instead of deploying their tax savings to grow their businesses, Canadian corporations are sitting on a “Mount Everest” of cash. According to London economist David Madani, when the most recent increment in the Harper tax-cut plan came into effect last New Year’s Day, Canadian corporations were already hoarding $526 billion. By comparison, U.S. corporations are sitting on a mountain of $1.3 trillion, or less than double the Canadian figure, with an economy ten times the size.
According to the Fraser Institute, Tax Freedom Day for Canadians fell on June 11 this year. That means, according the corporate think-tank, that until that day the average taxpayer was working for the government. But the Canadian Labour Congress has calculated that Corporate Tax Freedom Day fell on February 1.
That means that if you are a typical taxpayer, you went on slogging for Revenue Canada for 132 days after General Motors started putting it all in the bank. To give credit where it’s due, Canadian corporations have done an outstanding job of deploying those tax cuts in one direction – that of executive salaries. Valeant Pharmaceuticals paid CEO J. Michael Pearson $36,318,841 last year, while Bradley Shaw of Shaw Communications got by on $15,851,336.
When Stephen Harper became prime minister in 2006, Canada was running an annual surplus of $13.8 billion. After six years of what is called conservative government, our surplus was all spent and the annual deficit came in at $23.5 billion. While apparently blind to the looming $400-billion infrastructure deficit, the government has correctly identified the record fiscal deficit as a priority, and proposes, to no one’s surprise, to correct the matter by cutting spending. Here are a few examples of places the Conservatives will save money to pay for billion-dollar corporate tax cuts.
They plan to save $5.2 billion by putting 19,200 government employees out of work. The parliamentary budget officer estimates that cuts to health-care spending will amount to $26 billion over seven years. The Canadian Environmental Assessment Agency will take a 40 per cent cut. The youth program Katimavik is gone altogether, and so is CBC Radio Arts.
Several world-famous Canadian scientific research centres are slated to lose their federal funding, including the Yukon’s Kluane Lake Research Station, a multi-disciplinary facility whose closure would squander 50 years of baseline studies in glacier research alone. Cuts to Parks Canada will shorten the camping season, reduce protection for wildlife, and close interpretive centres.
Youth justice programs will see a yearly budget cut of $35.6 million, or 20 per cent this year. Heavy Urban Search and Rescue Teams, such as the one that leads rescue efforts at the collapsed mall in Elliot Lake, will be forced to disband. According to Sean Tracey, chairman of the board of the Canadian Centre for Emergency Preparedness, this leaves “nobody who would be able to respond to an incident such as this (Elliot Lake) inside Canada, anywhere.” Meat and seafood inspectors will be cut. Department of Fisheries scientists face layoffs. Department of National Defence staff who deal with suicide prevention and PTSD are on their way out. About $4 million is coming out of oil spill response funding.
These represent just a fraction of the ways in which Canada is a poorer, more ignorant, and more dangerous place to live since the 2012 budget. A government on the verge of fiscal collapse might explain away cuts like these as desperate measures for desperate times. One with billions to spare for no-strings-attached tax cuts that end up padding salaries already so huge they’re practically impossible to spend, or sitting in corporate bank accounts doing no one any good, is going to have to come up with another excuse.
Al Pope has twice won the
Ma Murray Award for Best
Columnist in BC/Yukon.