The 6 Billion Dollar Question

As I mentioned briefly on Sunday, Ignatieff's proposal to cancel the corporate tax cuts should form the main ideological fault line of the next election campaign. That's not to say it's all the election will be about - let's not kid ourselves, we're still going to get "Harper's a dictator" and "Ignatieff's just visiting" attack ads. But when it comes to policy, we may finally have found an answer to the question "what would Ignatieff do differently from Harper?".

Is it good policy? Well, I'm not an economist. Most economists like corporate tax cuts, but Canada is already quite competitive in this domain, and even executives recognize that corporate tax cuts may have to wait until the economy improves. On the whole, I tend to think the cuts would be good for the economy, but investing the 5-6 billion in early learning or post-secondary education will also help us in the long run.

Besides, as we all learned during the Green Shift Self Destruction Tour '08, good policy doesn't always make for good politics. So how will this play out politically?


For the Tories

We've already seen them refer to this as Ignatieff's "job killing tax", and that seems like as good a way as any to message it. Corporations don't vote, so Harper absolutely has to connect this to individuals, and "job killing" is a whole lot easier to talk about than the nuances of international competitiveness and trickle down economics.

They'll try to frame the election as the "tax and spend" Liberals up against Harper, the sound and stable economic manager.


For the Liberals

This gives them some wiggle room to propose new programs and/or promise deficit reduction. In effect, it's their chance to differentiate themselves from the Tories and the success of this gambit is ultimately going to rest on what they propose to do with the 6 billion.

I personally don't think there's a lot of sympathy for corporations out there, so expect them to frame the campaign as the Conservatives in bed with big business, against a Liberal Party who will actually do something to make your life better.


For the NDP

Overlooked in the early analysis of this move has been what it means for the NDP. As is often the case when the Liberals take an idea of theirs, this isn't good news for our Dipper friends. Because really, if you care about the issue, why vote for the guy who can't do anything about it? And if Layton tries to out do Ignatieff and promises tax hikes...well...that just pushes him further away from the mainstream and makes Ignatieff's position look more centrist, by comparison.

In effect, NDP ads against big business and corporate tax cuts would now become de facto third party advertising for the Liberals. Jack's either gonna need a new wedge issue, or a convincing narrative that turns NDP/Liberal swing voters off Ignatieff.

Trick or Treat

It's interesting to see the Tories rush what would have been a good news spring budget up to October and take a 1% GST cut out of their next election platform by bringing it in now. I suppose with money to burn and Dion calling for tax cuts, it was inevitable that Flaherty would be slashing taxes. As for the GST cut, given that every economist and every news story calls it "bad policy but good politics", I suspect Harper recognized that it's usefulness as an election issue had passed and that he might as well get it off the table. People aren't stupid - after a while "bad policy but good politics" simply becomes "bad policy and bad politics".

More interesting is the arrival of a new auditor general's report. Even from Paris, the timing looks a little coincidental:

Back in the mid-'00s, we used to enjoy a chuckle whenever the Paul Martin crew would come up with some extraordinarily contrived sideshow in an attempt to bury an embarrassing headline.

But even that PMO would never have thought it could get away with announcing tax cuts on 24 hours' notice, simply to bury an auditor general's report.

UPDATE: As pointed out by an astute reader, the federal government must give 60 days notice to the provinces that harmonize their taxes before changing the GST. As a result, if they wanted to make the change for January 1st, it had to be announced yesterday so it was likely not connected to the AG's report. It's still interesting to see them rush the GST cut to January 1st, but it doesn't look like there's anything involved in the day-to-day timing of it.


UPDATE2: I elaborate a bit more on my thoughts on this Macleans post.

Galleons, Sickles, and Knuts

Finance Minister Jim Flaherty said distributors and retailers should lower prices "as soon as possible" to reflect a soaring Canadian dollar, and held up a copy of the latest Harry Potter book as an example of how some items are still much cheaper in the U.S.

[...]

Flaherty said he looked at a copy of the recent Harry Potter book in Washington this past weekend, which was selling for US$29.74 before tax. He came back to Ottawa and purchased the Canadian version, which was $36 before tax.

What the wire story forgot to include was the following:

Upon learning that Dumbledore was gay, a visibly shaken Flaherty promptly returned both the American and Canadian copies of the book.

In other Flaherty news, it appears Jim will be presenting a fall mini budget as part of he who cannot be named's devious scheme to plunge us into an election. The thinking is, I guess, that the Liberals will want to fight an election against tax cuts. Some advice to the dark lord - if the Tories really want an election, just put forward the "Kitten Genocide Bill" and it will happen. Proposing popular tax cuts is not going to do it, especially when the Libs support all the proposals except the GST cut.