“It’s outrageous that a profitable company would ask workers to accept a 50 percent wage cut on top of cuts to benefits and pensions.  Instead of handing out billions in big corporate tax cuts, we need to support businesses creating well-paying local jobs,” said Green Party of Ontario Leader Mike Schreiner, who is attending the workers’ rally with London area Greens on Saturday, January 21st. 

“Unfortunately, these London workers are experiencing first hand that corporate tax cuts do not lead to more employment,” said Green Leader May (Saanich-Gulf Islands).  “The manufacturing industry is suffering in Canada yet the Harper government simply gives out bailouts without adequately protecting Canadian jobs.”

Since 2000, corporate income taxes in Canada have been almost in half.

“Electro-Motive is Canada’s only locomotive manufacturer.  This latest crisis also reminds us of the total lack of government investment into our rail lines, putting us far behind other countries.  An improved rail system would make Canada more economically competitive and provide thousands of new jobs,” said May.

The Green Party would re-invest in our national rail systems, building more train cars in Canada, increasing train speeds and phasing in high speed rail where feasible, and creating green transportation and energy infrastructure corridors in key regions.

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Most Canadians do not like paying taxes, especially if they think that the taxes are unfair or do not deliver good value for money. People do not like wasteful spending by an over-bureaucratized government. Fair enough. However, about half of Canadians say that they would not mind paying more taxes for a cleaner environment, better health care and education, and to support people in need.

Taxation and spending policies shape society by sending signals about which sectors of society governments think are important. Over the last six years, both the Conservatives and Liberals have used our tax system to benefit large corporations, reducing federal corporate taxes. Back in 2000, the general rate of taxation on corporate profits was 29.1%. By 2006, when the Harper government came into office, the corporate tax rate had been cut to 22.1%. We all remember our budgets consistently posted surpluses at that time.

No longer. Canada moved into a deficit just before the economic meltdown in September 2008. Due to cutting the GST, cuts to corporate income taxes, and increased spending, the Harper government had eradicated the surplus just in time for a recession. For the first time since former Finance Minister Paul Martin under Chretien slayed the federal deficit – at enormous cost to health care and education – Canada started running deficits. Deficits can be managed, but debt erodes public revenue through interest payments. The debt has ballooned. The federal debt now stands at more than $600 billion. An astonishing 24% of that federal debt was run up on Stephen Harper’s watch. The cost of servicing that debt is $29 billion per year.

There is an alternative to borrowing from commercial banks and paying that $29 billion to banks. Many Canadians want to revisit the role of the Bank of Canada. Monetary policy could shift to reduce the high levels of interest-bearing debt.

Meanwhile, all through the recession, the Conservatives have continued to cut the corporate tax rate. In 2008, the rate fell to 18%. By 2012, it fell to 15% – the lowest tax rate on big corporate profits in the industrialized world. Canada’s tax rate on the largest and wealthiest corporations on earth is now half that paid by corporations in the U.S.

When the corporate tax rate was slashed, the spin from the Harper Administration was that the largest corporations in Canada were ‘job creators.’ The justification for eroding government revenues in favour of greater corporate profits was that it would result in a big boost in employment.

However, the evidence is now in. Corporations have not used the extra cash to create jobs. They have not re-invested it in the Canadian economy. In the words of Mark Carney, former Governor of the Bank of Canada, the money that would have gone to pay for critical infrastructure, veterans’ benefits, and environmental research is “dead money.” It has not created jobs. It is sloshing around in the bank accounts of Canada’s biggest corporations. It is an astonishing $629 billion – 35% of Canada’s GDP.

At the same time, the cost of living has increased. Canadians save less, carry more debt, and work more hours for the same money. Even before the current recession hit, people were having a harder time providing for their families and paying for a decent place to live.

The Green Party believes in reforming our tax system to make it fairer and more in tune with Canadians’ desire for a healthy environment, a sustainable economy, and a vibrant, caring society. It makes no sense to subsidize the wealthiest corporations on Earth – the oil companies. We must remove these perverse subsidies immediately, not in the slow ‘grandfathered’ approach of the Conservatives’ 2007 budget.

The Green Party will reduce taxes on things we all want, like income and employment, and we will increase taxes on things we do not want, like pollution that harms people and our environment.

Our ‘green tax cuts’ will be progressive, with a schedule that gives industry time to gear up or gear down. The ecological fiscal reform undertaken by Greens will include carbon pricing as well as taxes on cancer-causing substances and junk food that harms our children. And they will be revenue neutral because a tax shift is not a tax grab. Income and payroll taxes will decline and the changes will help, not hurt, less fortunate members of our society. In the case of Green carbon pricing, the funds collected will never enter the general revenues of Canada but will be redistributed in full to Canadians. This system is called ‘carbon fee and dividend.’ The fee is charged at the point of production and the funds are divided equally among all Canadians, received as a cheque for your share of the carbon dividend. Those with lower incomes will receive a proportionally bigger impact as the cheque received will be a larger percentage of their total income compared to those of higher income.

To set the right prices, we have to change to a ‘true’ or ‘full-cost’ accounting method that incorporates economic, social, and environmental costs and benefits in the national accounts. Using this method, products and services are taxed, and thus priced, according to the positive or negative impacts caused throughout their lifecycle. We have already done this with tobacco products. Such taxes help consumers make more rational choices.

There are other ways to put taxes to work improving our society. Our tax system must be designed to reduce poverty, encourage environmentally-beneficial activities, and generate more wealth for the 90% of Canadian families who are currently working harder without getting further ahead.

The Greens’ fiscal plan is straightforward: gradually reduce our debt, give clear tax signals that enable companies to pursue profits on a level playing field, and shift taxes to ensure that both revenue streams and expenditures meet social, economic, and ecological goals.

Green Party MPs will:

• Institute a full range of ‘polluter pays’ taxes, including a carbon fee and dividend designed to reduce the use of fossil fuels by sending a market signal to producers. All these taxes will be revenue neutral;
• Apply border adjustments to ensure Canadian businesses do not face unfair competition from polluting jurisdictions. In order to maintain a level playing field for Canadian businesses with respect to foreign competitors, carbon-based tariffs will be introduced against countries that  apply no carbon tax (or other equivalent mechanism to curb GHG emissions) or apply a lower rate of carbon tax than Canada. These border adjustments will also be distributed in the ‘dividend’ to Canadians;
• Return Corporate Tax rates, except for the Small Business tax rate, to the 2008 level;
• Eliminate personal taxes on incomes below the low-income cut-off (no taxes on incomes of $20,000 or less);
• Review the economic and fiscal implications of returning to borrowing from the Bank of Canada;
• Work with the provinces to increase taxes on tobacco and alcohol;
• Encourage use of Canada Revenue Agency’s online NETFILE tax filing system (which saves Revenue Canada money) by giving users an automatic $10 tax credit;
• Develop a specific tax-shifting schedule to provide tax incentives and direct rebates to businesses and individuals investing in the modern clean-tech economy (e.g. installing solar hot water systems, refitting homes and businesses to conserve energy);
• Provide increased tax breaks for Canadians who donate to registered charities.

(See Part 4: PEOPLE for more on family-friendly taxation, including income splitting)

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If taxes are a lot lower in the US than in Canada, it can lead to a loss to our economy. Of course, it’s comparing apples to oranges—as our business leaders well know. Canadian social programmes are a boon to business. Universal health care, for example, is a real savings to Canadian employers versus US employers. One of my favourite friends in the forest industry, Frank Dottori (former CEO at Tembec) once argued that Canadian forest companies were happy to ignore that useful subsidy to their operations—access to reliable unemployment insurance which allowed them to lay off workers seasonally— without having to risk their unavailability later on.

Back in 2000, the general rate of taxation on corporate profits was 29.1%. By 2006, when the Harper government came into office, the corporate tax rate had fallen to 22.1%. At that time, we all remember our budgets consistently posted surpluses. In those days, it was part of the cut and thrust of Parliamentary debate to accuse the finance minister of hiding away the size of a surplus so as to have a surprise windfall.

No longer. Canada moved into a deficit just before the global economic meltdown in September 2008. Due to cutting the GST, cuts to corporate income taxes and increased spending, the Harper government had eradicated the surplus just in time for a recession. With an empty cupboard, Canada has moved further into debt to fund the stimulus package. The latest estimate is that we are now running a $45 billion deficit.

Meanwhile, all through the recession, the corporate tax rate has continued to fall. Last year the rate fell to 18%. As of January 1, 2011, it is 16.5%, with a further cut to 15% planned for next year.

As is becoming clear, the Opposition Parties will oppose further cuts to corporate taxes. The Green Party is proposing that we return to the taxation level of 2008—19.5%.

Reframing Corporate Tax Cuts As Jobs

So, in a nutshell, here is Mr Harper’s communications challenge. How do you convince the electorate that it makes sense to keep cutting the taxes of large profitable corporations: while increasing EI deductions on every paycheque, when there has been no income tax cut for four years, and while facing a daunting $45 billion deficit?

In Don’t Think of an Elephant, US political strategist George Lakoff described how the Republican Party had persuaded US voters to vote against their own interests. It was all about ‘framing’ the issue—so, don’t say ‘cuts to social programmes,’ say ‘tax relief’. It’s all in the (re)framing.

Finance Minister Jim Flaherty has come up with the way to ‘re-frame’ tax cuts for corporations. Corporate tax cuts are now framed as support for the ‘job creators.’ This is not to say that job creation is a new concept—job creation is a priority. And government policies have major impacts on the private sector’s ability to create jobs. There is no question that corporations employ people. But there is absolutely no evidence that cutting the corporate tax rate will cause corporations to create more jobs; despite Prime Minister Harper’s claim that a further 1–1/2% reduction in corporate taxes will create 100,000 jobs.

As some economists have pointed out, the reduction of tax rates in Canada is irrelevant for corporations headquartered in the US. Any increase in corporate profits in Canada must be taxed when repatriated to US head office at the rate of 35%. For those companies, cutting Canadian taxes is essentially handing Canadian tax dollars over to the US Treasury. For Canadian- based companies, the reduction in taxes may or may not be used to expand the workforce.

Just as in the HST debate provincially (when we were told manufacturers receiving reduced taxation would pass those savings on to consumers), Canadians have a right to be deeply sceptical of claims that reduced taxation will be a job stimulant.

A prudent CEO may have many other plans—re-invest in equipment, increase dividends to shareholders, increase compensation for the top staff, make a play for another company, put cash down for mergers and acquisitions….

The idea that increasing corporate profits will result in more jobs reminds me of John Kenneth Galbraith’s explanation of the trickle-down effect: ‘If you feed grain to the horse, the sparrows will find something to eat in the manure.’

Doing The Math

As there is no empirical evidence that lowering corporate taxes increases employment, let’s look for a moment at Finance Canada’s own math. The stimulus effects that the government calculated in 2009 are based on multipliers So in 2009, for instance, $1 spent by the government on corporate tax cuts resulted in 10¢ in real GDP growth, that same $1 spent in infrastructure leads to $1 in real GDP. The government goes on calculate that a 1% increase in real GDP leads to a 2% increase in employment.

Let’s assume we plan to spend $3 billion to create employment and our choice is to either spend it on tax cuts to corporations or for new infrastructure. Using the government’s own multipliers for the stimulus plan, that $3 billion in year one would create 6,500 jobs in infrastructure or 650 jobs if spent on tax cuts to corporations.

My friend the economist (who helped me do the math) agrees that we really do not entirely trust Flaherty’s model but it seems fair to use the government’s model to judge the effectiveness of cutting corporate taxes to create jobs. And, by that measure, the term ‘job creators’ should be expunged from Flaherty’s vocabulary as failing the tests for ‘truth in advertising.’

Elizabeth E. May, O.C. is the nominated candidate for the Green Party in Saanich Gulf Islands and was named by Newsweek magazine in November 2010 as ‘one of the world’s most influential women.’

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A lot more has disappeared in this budget than a primary colour.

There’s a fairly magical vanishing act with the $56 billion deficit. By 2015, the budget projects a $1.8 billion deficit. To get there, the Harper government is counting on a 40% increase in revenues from corporate profits, even as they continue to slash corporate tax rates. To have these numbers hold up, absolutely nothing can go wrong in Canada or the world economy’s recovery.

Real pain will come from a dramatic hike in EI premiums. The budget sets out that by 2015, the government will have collected $29 billion more in EI premiums than in 2010. The impact of this job-killing tax has already been protested by independent, small business and the labour movement. Other cuts are in projected increases in funding. Particularly hard-hit will be CIDA and our overseas development assistance, set to lose $4.5 billion in increased support. This translates into a budgetary freeze at CIDA, even though the budget claims Canada will help re-build Haiti and assist developing countries with impacts of the climate crisis. Stockwell Day is charged with finding $7 billion in cuts to government operations by 2015. Promised pension reform also disappeared. Instead, the government promises a national consultation.

Also gone, hey presto! is the funding for climate research to the Canadian Foundation for Climate and Atmospheric Sciences. Many of the researchers at University of Victoria’s Canadian Centre for Climate Modelling and Analysis have benefitted from grants from the CFCAS. Their work is now in jeopardy, as is the polar research station at Ellesmere Island, now likely to close. There was no renewal of the ecoEnergy Technology Initiative which boosted wind energy production (although the budget boasts of its success). There is nothing for national parks. No money for mass transit investments, and other than an already announced upgrading of existing VIA cars and track (to bring them up to standards in the developing world) nothing for trains. No high speed rail for Canadians. We just export that technology to China and Spain.

The elimination of funding for climate science is particularly egregious. IPCC scientist Dr Gordon McBean, who spent some of his earlier years on West Saanich Road in the Institute for Ocean Sciences, was outraged.

‘Budget 2010 is basically the nightmare scenario for scientists across the country—our community is gutted,’ said McBean who is Chair of Canadian Foundation for Climate and Atmospheric Sciences. ‘…Without sound scientific information, how will the government evaluate the effectiveness of green technologies, or build northern infrastructure, or develop our energy industry, or assure water supply and clean air?’ he commented.

This question to the Harper government is largely rhetorical—how the government will evaluate anything related to science is a question that has not troubled this government. It has eliminated the Science Advisor to the Prime Minister and has cut into research before. This decision impacts climate research across Canada. We didn’t have a climate action plan before this budget and we don’t have one now. The new Harper government target, announced in January, represents yet another weakening. By changing our base year (again!) from 2006 to 2005, Canada has even more room to evade responsibility. Unlike the US, Canadian emissions in 2005 were higher than in 2006, so by shifting to 17% below 2005 instead of 20% below 2006 levels, we have reduced our target by 6%, not the 3% that simple math would suggest. We have the lowest target in the G-8, with no plan to get there. Our government’s strategy on climate change is transparent. Harper and Prentice continually associate our inaction with our commitment to a North American strategy. They claim we are ‘waiting for Obama’ before taking any action. If this government should still be in power by the time the US has settled on the details of their domestic plan, I am sure they will find a reason that they can no longer meet US actions.

President Obama, while hobbled by a flawed strategy of faith in bi-partisanship in the US Congress, has not stood still. The US stimulus package included hundreds of billions for green technology. Canada, in contrast, is the only nation in the G-20 to have cut support for renewables in the budget. The truth is that the Harper government is using the ‘waiting for Obama’ strategy as a stalling tactic. It has no intention of ever acting to reduce greenhouse gases. On the contrary, it is committed to their expansion.

That will explain why the budget section titled, ‘Green Jobs and Growth’ is all about oil, gas and uranium. It commits to reducing red tape that gets in the way of investments in energy mega-projects. To do that, the 2010 budget sets a course to remove energy projects from assessment under the Canadian Environmental Assessment Act. All energy projects will now be assessed by the National Energy Board or, if nuclear, the Canadian Nuclear Safety Commission (CNSC).

After Saanich–Gulf Islands MP Gary Lunn’s firing of Linda Keen, the former President of the CNSC, it is unlikely that boards or commissions will thwart the will of the Harper government. Keen’s firing sent shock waves through boards and tribunals. As Auditor General Shelia Fraser said at the time, it had had a ‘chilling effect.’

Meanwhile, the National Energy Board lacks the tools to conduct full environmental assessments. It is a quasi- judicial body, far more formal than Canadian Environmental Assessment Agency (CEAA). This change will not save money, but it is clearly intended to rush projects through review.

The planned expansion of the tar sands, the Mackenzie Gas Pipeline, pipelines across northern British Columbia and the use of oil takers to move tar sands crude to China will not be put to an environmental review under CEAA.

Oil spills such as that from the Exxon Valdez, are also of great concern to people living on southern Vancouver Island and the Gulf Islands.

When such risky projects gets to the approval stage, I want to know they will be placed before a process founded on principles of public participation. I want to be confident we can present the best scientific case before an impartial panel of experts in environmental matters. Under this budget, that will not be possible.

We must push back on this dangerous delegation of responsibility. The Harper government may have used the gender-neutral lyrics for ‘O Canada’ as a deliberate diversionary tactic. Standing on guard for Canada means more than singing our anthem. It means defending our lands and waters.

You can view a visual presentation of Elizabeth May’s budget commentary at: http://www.youtube.com/watch?v=Vzf3Bc7lQFU.

Elizabeth May, Order of Canada, is leader of the Green Party of Canada. She attended the Speech from the Throne and the budget lock-up with other Opposition leaders on March 4, 2010.

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