Socialism for the rich is Tory way

The Harper Conservatives' massive, multi-year corporate tax cuts designed to make Canada's the lowest among G8 countries are the major cause of rising deficits and debt. Now, they're obliging a frontal assault on the federal government itself.

All government department administrative expenditures are to be frozen for two years except for national defence and the Canadian Security and Intelligence Service.

A so-called red-tape commission will be created to "streamline" government regulations that supposedly "interfere" with business, particularly, the energy and mining sector. Future federal environmental assessments of all new energy projects will be carried out by the Calgary-based, oil patch-friendly, National Energy Board, not the Canadian Environmental Assessment Agency.

The penchant of Canadian governments of all political stripes and at all levels to direct their tax cuts to the wealthy, both individuals and businesses, is pronounced enough that it has caught the attention of the Organization for Economic Co-operation and Development, the Paris-based association of 29 member nations to stimulate economic progress and world trade.

States the OECD: "While across the OECD, tax-burden changes have tended to favour low-wage earners, Canada is among a minority of countries where tax reforms have resulted in higher-earning employees benefitting the most from significantly higher tax reductions than those in the middle or bottom part of the earnings range."

Federal spending as a proportion of GDP has been shrinking steadily, from 21 per cent in 1983 to 13 per cent in 2009. In 2001, all levels of government in Canada were spending about 49 per cent of GDP. By 2009, that had dropped to 38.5 per cent. That translates into a loss of $152 billion in services annually.

"There is a clear connection between our shrinking federal government and growing inequality in Canada," Larry Brown, national secretary treasurer of the National Union of Public and General Employees, says. "A market economy that is left unregulated and uncontrolled creates massive inequality ... The latest Statistics Canada analysis of the 2006 census confirms what most of us already know. There is a large and growing gap between the wealthy and the rest of us in Canada. The wealthy have surged ahead, the poor have gotten even poorer, and the vast numbers in the middle have barely held their own."

And the current goal to slash ability-to-pay taxes by a cumulative $220 billion by 2013 has only reached the half-way point. Ottawa's aim for the lowest corporate taxes in the G7 means slashing them from 22 per cent in 2007 to 15 per cent by 2012. When fully implemented in 2012-13, Ottawa's total annual tax giveaway -- $15 billion to corporations, $14 billion to the GST and $11 billion to persons -- will deprive the federal treasury and Canadians of over $40 billion in programs and services each and every year.

That's equal to the combined $40-billion annual cost of the Canada Health Transfer and the Canada Social Transfer.

"In other words," points out United Steelworkers economist Erin Weir, "had the Conservatives not slashed taxes, the federal government could afford to double its spending on health care, post-secondary education and social assistance."

And there is no reason to assume corporations will re-invest and re-employ their windfall. "The previous round of corporate tax cuts begun in 2000 has increased after-tax profits to record heights without a corresponding rise in business investment," Weir continues. "In fact, Canada's ratio of business investment to profit has fallen to an all-time low."

Meanwhile, 486,000 full-time Canadian jobs were wiped out in the recession and 810,000 Employment Insurance (EI) beneficiaries may run out of benefits within the next few months, Canadian Centre for Policy Alternatives Senior Economist Armine Yalnizyan warns.

A better way to spur corporate investment and employment is a refundable investment tax credit, already implemented in both Manitoba and Quebec, Weir says.

Brian Topp is executive director of ACTRA, and former NDP national campaign director. In his new book, How We Almost Gave The Tories The Boot: The Inside Story Behind the Coalition, he sets out neo-conservatism's perverse mantra: Permanent tax cuts for wealthy individuals and business are "investments." Help for poor families is "structural spending."

Republished from the Winnipeg Free Press print edition March 10, 2010 A15