Sunday, March 28, 2010

Two Paths

The big news out of Ignatieff's closing speech from the Canada150 conference is his pledge to overturn scheduled cuts to the corporate tax rate.

I'm trying to find the exact figures, but I believe that would boost government revenue by 10-15 billion a year 5-6 billion a year (not taking into account any lost productivity). That's not small change, and it answers the question of how the Liberals will be able to promise program spending and deficit reduction. And it's certainly a lot easier to sell than an income tax or GST hike (or, ahem, a carbon tax).

So there you have the crux of the next election. The Conservatives will promise they're good for business and the economy. The Liberals will promise spending initiatives and deficit reduction. As far as ideological clashes go, that's not a bad debate to have. If we're lucky, we might actually get an election that's about something for a change.

37 Comments:

  • And now the tories will scream "You are killing jobs"

    You really can't win

    By Anonymous Anonymous, at 4:06 PM  

  • we might actually get an election that's about something for a change

    If I had a dollar...

    By Blogger Jeff Jedras, at 4:11 PM  

  • I do think the NDP should be allowed an "I told you so" or two on this one, though.

    We've advocated the same policy for quite some time now, only to be told condescending by you lot that this proved we didn't understand innovation or some such nonsense.

    As though, if the lowest corporate tax rate in the OECD hadn't already stimulated innovation, two further drops were going to do the trick!

    By Blogger A reader, at 4:13 PM  

  • I just heard on the news (CBC) that he would freeze corporate taxes at 15%.
    That makes really no sense since they are scheduled to only go down to 15% by 2012. No further-they will already be frozen at that rate.
    So, if the Liberals get into government after the rate goes to 15% anyways what is the difference?
    Or, if the Liberals get elected when the rate is 15% will they then raise it? I heard Ignatieff say something about 18%. Very confusing to the investment community who have to plan years in advance don't you think?.

    By Anonymous Anonymous, at 4:18 PM  

  • At some point the Libs will have to vote against those cuts which will be included in a budget that will have some other relief for the ordinary Joe or perhaps more funding for health care. Iggy has blundered here.

    By Anonymous Anonymous, at 4:18 PM  

  • Did we really need a "thinkers conference" to come up with that?

    By Anonymous Anonymous, at 4:19 PM  

  • I could have sworn that Dippers campaigned on 'no more corporate tax cuts' in 2008.


    Layton to Harper: no corporate tax cuts
    David Akin,
    February 19, 2010
    http://www.nationalpost.com/related/links/story.html?id=2586121

    Craig Oliver will be happy to see, the decision has been made,
    'go left' it is.

    By Blogger wilson, at 4:21 PM  

  • This policy will last about a month - the length of time it will take for Jack Layton to put a motion to this effect on to the floor of the House of Commons.

    At that point, we'll really see how committed Iggy is to this.

    By Blogger Lou Arab, at 4:29 PM  

  • -National daycare/early learning,
    -extended homecare for the elderly,
    -free university if you get the grades
    -no more corporate tax cuts,
    -no healthcare reform,

    that should seal the deal with Jack.
    But does Jack still get a cabinet seat, or does running on the 2008 NDP platform suffice?
    Oooh, maybe it's a joint platform for the united left?

    By Blogger wilson, at 5:11 PM  

  • Hello Wilson

    You have a very keen insight, into things.

    It is just a ridiculous, insight but an insight, all the same.

    Do you ever sleep?

    I heard CPC was running on a platform, of running up hugh deficits every year.

    We no explanation how we get out of them, or how we are going to pay for it.

    I also heard they were running on a platform of dismantling the gun registry, even though the police want it, and you are supposed to be tough on crime.

    I also heard the CPC was again running on an accountability platform, if though you guys will not hand over unredacted documents, as ordered by parliament. And not respect parliamentary supremacy.

    I also heard the CPC was running on a platform of prorogation of parliament, when you want to shut things down.

    I also heard the CPC was running on a platform of not appointing senators.

    (OOPS silly me, Steve already appointed the greatest number of senators at 1 time, of any PM)

    I also heard the CPC was planning to run on a cancer is sexy mantra.

    I also believe they want to run on a platform of buying everyone a jet, so that they can fly to Tim Hortons for coffee.

    They also want to run on a platform of not respecting the Canadian constitution.

    They also want to run on the platform of MPs behaving badly in airports, and calling provinces "Hell holes"

    They also want to run on a platform of MPs calling the unemployed no good bastards.

    They also want to run on a platform of being climate change deniers, and embarassing us on the world stage.

    That my friend Wilson is one winning platform, even if I do say so myself.

    Cheers Wilson

    By Anonymous Anonymous, at 5:31 PM  

  • Yeah, but what now? Keep voting with Herr Harper until he decides to call an election?

    By Anonymous Anonymous, at 5:55 PM  

  • And all of those terrible things on that laundry list, they happened during a four year period in a minority parliament and the Libs not once dared to bring them down.

    Iggy;Your time is up.

    By Anonymous Anonymous, at 5:56 PM  

  • Ignatieff: "Canada is a network."

    i.e. Iggy is Joe Clark's heir. "Canada is a community of communities".

    And last week, Iggy demonstrated that he couldn't count also.

    By Blogger whyshouldIsellyourwheat, at 6:08 PM  

  • Well

    I wish you conservatives could make up your mind on things.

    I thought you said Ignatieff was just in it for himself.

    When he tried to bring down Harper last September, you guys went ape shit and called him an opportunist.

    My oh My, trying now to make parliament work, and you are still going ape shit.

    You complain he has no ideas, and are always asking him for his ideas, on how to fix up the mess made by Harper.

    He holds a conference trying to bring people together and form good policy.

    You still go ape shit.

    You lean on a crutch of national security and protecting our troops to cover up what could potentially be crimes.

    You talk down to the public as if we are all 12 year olds, who do not understand that the deficit has to be paid by either raising taxes or cutting services.

    You pit one group of Canadians against another.

    You pit one province against another.

    You engage in filthy republican style personal attacks, between elections on a party leader.

    You try to make politics so divisive, and negative, that you drive down voter turnout, and turn people off politics.

    You find the most ridiculous clowns in your caucus (Polieievre, Braid, Baird, Hawn, Flaherty, Del Mastro, Raitt, Guergis, Toews,
    Clement, Cannon, and various others) to go all over TV to defend what is basically shit and lies.

    You appeal to the lowest common denominator.

    Is it any wonder people found the adult conversation, at the conference refreshing.

    The average mentality of the conservative front bench is about 11 years old.

    Harper, while he just acts like a spolied 4 year old, who always needs a time out for bad behaviour.

    By Anonymous Anonymous, at 6:15 PM  

  • I found another comment by Ignatieff to be somewhat foggy. The Liberals would have an annual defecit of only 1% of GDP per year.

    Since GDP is not a set figure how will that work?

    1% of what? $400 billion? $500 billion? $350 billion?

    By Anonymous Anonymous, at 6:28 PM  

  • Ottawa Citizen coverage pegs the value at $5 to $7 Billion, about half of what you're suggesting.

    The debate is about whose money it is: Ignatieff says that it's time to realize (his) big dreams, and (in effect) that we can't afford to let this money stay in the hands of those who earned it so that they can realize their own big dreams.

    Tell you what: as an experiment, why not send me 3% of everything you earn this year, so that I can realize my dreams for Canada. How does that work for you?

    By Blogger Paul, at 8:24 PM  

  • I just want to break through the wall of trolls here and say directly to Calgary Grit, once again, as a Tory voter who hates the cynical, partisah drift of the current government, I'm still liking what I'm hearing from the Grits more and more. Not because I agree with it all, but because it's at least reasonable. I wouldn't be afraid for the country if we didn't cut corporate tax cuts more. Where I am afraid for the country if the government can't agree to a direct, formal request from a majority of MPs.

    I thought the whole event went well.

    I can think of ways to make "network government" work, even if it sounds a little wonkish to begin with.

    Keep it up.

    By Anonymous Anonymous, at 9:41 PM  

  • The debate is about whose money it is: Ignatieff says that it's time to realize (his) big dreams, and (in effect) that we can't afford to let this money stay in the hands of those who earned it so that they can realize their own big dreams.

    Tell you what: as an experiment, why not send me 3% of everything you earn this year, so that I can realize my dreams for Canada. How does that work for you?


    If you're willing to pay for my health care, education, roads, and government services with that 3%, then you've got a deal.

    By Blogger calgarygrit, at 10:16 PM  

  • And, as for the actual amount, the Citizen may be right...I'm sure the Libs will provide us with a dollar figure at some point. It really depends on what level they freeze them.

    And, yup, NDP can give an "I told you so" if they want.

    By Blogger calgarygrit, at 10:17 PM  

  • If you're willing to pay for my health care, education, roads, and government services with that 3%, then you've got a deal.

    ZING!

    Mes felicitations Paul, you are PWNED

    By Blogger Jacques Beau Vert, at 10:33 PM  

  • While I disagree with some of Mr. Ignatieff's specific proposals, I like the general direction that this could move towards in terms of party politics. It would be nice to have an election where Liberals propose liberal policies and Conservative propose conservative policies. As many of the soundbites coming out of this conference correctly pointed out, right now all we get is two parties proposing very little of substance in an effort to avoid offending anyone.

    By Blogger Toronto Tory, at 12:00 AM  

  • "If you're willing to pay for my health care, education, roads, and government services with that 3%, then you've got a deal."

    Out of curiosity, how much would the cost of your usage of each of those items work out to? ;)

    Health care = $?
    Education = $?
    Roads = $?
    Government Services = $?

    By Blogger Toronto Tory, at 12:06 AM  

  • “As though, if the lowest corporate tax rate in the OECD hadn't already stimulated innovation, two further drops were going to do the trick!”
    ---
    But it isn’t about what works. It’s about what works for corporate Canada. The LPC’s sudden reversal on further tax cuts would last about as long as it took for them to be out of the electoral blast zone, i.e. when enough voters have forgotten that it can no longer hurt them at the polls.

    By Anonymous Anonymous, at 12:22 AM  

  • "If you're willing to pay for my health care, education, roads, and government services with that 3%, then you've got a deal."

    You're funny! You know that just at Iggy's promise was independent of today's tax promises, so are mine. Your services are already paid with your existing taxes so we'll exclude them from the deal.

    Just as Iggy would have.

    By Blogger Paul, at 3:09 AM  

  • Toronto Tory:

    The crux of the argument is that businesses are unable to directly create the environment that allows them to grow most efficiently - even if they paid zero taxes.

    With big challenges projected to start being a drag on the economy (debt, lack of skilled workers) it makes not only societal sense but business sense to confront these problems in preference to allowing a deterioration of the business environment.

    Health care provides one big comparative advantage in relieving corporations of paying for it like they do in the USA (if an employer provides coverage) - it is akin to a couple percentages less in payroll tax. We will garner similar advantages when we are able to better utilize all Canadians in the workforce due to better education, and the option of government assistance in family duties like elder and child care.

    Plus remember - the corporate income tax would not be going up, only a freeze until profits recovered to the point where cuts can once again be made without absolute revenue losses. (if our corporations are more profitable we can tax them less and earn the same or more money over time)

    By Blogger Kyle G. Olsen, at 3:34 AM  

  • This comment has been removed by the author.

    By Blogger Paul, at 4:13 AM  

  • For those interested in the Citizen article cited above, here's the link: href="http://www.ottawacitizen.com/business/Liberals+freeze+corporate+taxes+deficit+years/2737012/story.html"

    By Blogger Paul, at 4:14 AM  

  • Well, that second attempt at posting the link didn't do much better than the first. Sorry 'bout that. Now you'll be left with copying and pasting, I guess.

    By Blogger Paul, at 4:16 AM  

  • Why are deficits bad? Because they harm long-term economic growth through the "crowding out" effect (which will be minimal for a deficit as small as Canada's structural deficit).

    Why are corporate taxes bad? Because they are essentially a tax on employment, R&D and investment - in other words a tax on long-term economic growth.

    So, to avoid the problem of reduced long-term growth, Ignatieff has adopted a policy that will reduce long-term growth even more.

    Lets imagine two countries. One has revenues of 250 billion, which grow at 2%/year. The other has revenues of 243 billion and grows at 2.1%/year. After 30 years, which government will have more revenue?

    Country 1: 453.3 billion
    Country 2: 452.8 billion

    Answer: the one that cut corporate income taxes.

    Do corporate tax cuts increase growth, and by how much? The estimates I saw in a quick survey of articles (and a detailed reading of an NBER study from 1996) ranged from .2-.3%/year for a large cut.

    Am I advocating supply side economics? Well sort of. However, I don't think this logic should be applied to most other taxes, because their effect on long-term growth is limited.

    People have a poor understanding of what happens to corporate profits. Some go towards dividends, and some is negotiated away in wage settlements, but much of the remainder goes into investment and R&D.

    Instead of lowering growth to prevent growth-lowering deficits, I would focus on making cuts to programs with no effect, or a negative effect on growth.
    -corporate subsidies
    -regional development funds
    -foreign aid
    -the Canada pension plan
    -healthcare
    -the arts (the BS claim that arts spending creates jobs ignores the opportunity cost of spending that money elsewhere)
    -civil service salaries/hiring

    Infrastructure, R&D spending, and education spending could probably be increased without too many problems.

    By Blogger hosertohoosier, at 4:37 AM  

  • Boring. None of this does anything to help abort African fetuses.

    Instead of freezing corporate tax rates, we should be freezing African wombs!

    shame on the Liberals for turning away from abortion rights!

    By Anonymous Newly Concerned Citizens about Newly Unconcerned Liberals, at 11:11 AM  

  • The corporate world is in financial trouble.
    The government is in financial trouble.

    Guess who wins? :)

    By Blogger Robert Vollman, at 11:42 AM  

  • I know who loses:

    African women saddled with babies!

    this tax distraction will result in millions of dead women.

    Thanks, Liberals.

    By Anonymous Concerned Women Now Officially Leaning NDP, at 1:45 PM  

  • Regarding corporate taxes, it is about being competitive with regard to other jurisdictions.

    Canada's corporate tax rate is already 25% lower than the American one.

    That is plenty competitive. I still think the Liberals should raise consumption taxes to lower income taxes, but that makes me INSANE

    By Blogger Anthony, at 3:16 PM  

  • "Regarding corporate taxes, it is about being competitive with regard to other jurisdictions. "

    No, no it isn't. It is about whether or not we should tax corporate profits, and implicitly the things corporate profits are used for - building more plants, R&D, wage increases and dividends. None of those are things we want to tax, especially the first two.

    Lowering corporate taxes probably will increase foreign investment, which is an added bonus. However, we are probably not talking about a lot of investment. The real impact is on the billions of dollars already invested in Canada.

    Secondly, investment doesn't suddenly flow to where the lowest rates are. There are local advantages that keep investment at home. If attracting foreign investment is your goal, each reduction will bring in new investors, but it is a gradual process.

    By Blogger hosertohoosier, at 9:10 PM  

  • To emphasize H2H's point about it being a gradual process, remember that decisions are made to reflect the future: if the future tax regime is hostile, investment (and job growth) will go elsewhere.

    If the future tax regime promises stability, decisions can be made to take advantage of that opportunity (and provide new jobs in that region).

    As long as there is a threat of tax increases, the damage to the economy can be severe.

    By Blogger Paul, at 3:11 AM  

  • If I had a dollar...

    ... the government would take half?

    By Blogger Robert Vollman, at 10:40 AM  

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