Why am I not surprised? A committee – the Expert Panel on Business Taxation – made up exclusively of business representatives, appointed by a government that has shown incredible ineptitude when it comes to tax policy, is promoting the idea that lower business taxes will somehow be the salvation for our province.
Making matters worse, the BC Liberals and most of the province's business lobby organizations are pointing to the committee's recommendations as though they were the work of some divine oracle. They're not. They're simply the recitations of a tired script that the BC Liberals and their friends in Ottawa have trotted out at every budget tabled in B.C. over the last 12 years to justify bad choices and regressive tax measures. That the BC Liberals sit on the doorstep of political defeat is a testament to the fact B.C. voters have grown weary of their bad choices and regressive tax policy.
The idea that lower taxes to business are going to stimulate investment simply isn't supported by the facts. Business fixed-capital spending in Canada has declined as a share of GDP and as a share of corporate cash flow since the early 1980s – despite repeated tax cuts that have reduced the combined federal-provincial corporate tax rate from 50% to just 29.5% in 2010. Earlier this year, the Globe and Mail – not exactly a standard bearer of left-wing ideas in this country – analyzed the impact of business tax cuts. The paper reviewed Statistics Canada data and found that the rate of investment in machinery and equipment has declined in lockstep with falling corporate tax rates over the past decade. At the same time, businesses have added $83 billion to their cash reserves since the onset of the recession in 2008. In 2000, the combined federal-provincial tax rate was just over 42%, ranking Canada near the top among industrialized nations. The combined rate has since fallen to 28%, placing the country in the middle of the pack.
To advocates of corporate tax cuts, I would ask what tax cut has built a public hospital or educated a generation of young people or lifted a family out of poverty?
The answer is painfully obvious: tax cuts starve a public treasury of the very resources it needs to build public infrastructure, take care of people, steward public resources, create the conditions for real equality, do all the things that make a society prosper in ways that business lobby organizations are too quick to dismiss as someone else's responsibility.
If the provincial government is serious about getting real answers from real people about real choices when it comes to tax policy, it could start by asking the right questions and seeking the input from more than just a select few in the province's business organizations.
Why not start by asking citizens about the services they need, then ask them about how we – that means everyone – can pay for them in a way that honestly reflects the ability of individuals and corporations to pay the needed taxes that ultimately finance those services?
It's called a progressive tax system for a reason; it delivers progress. We could do with a lot more of it.
