Friday, February 04, 2011

Dix plan for corporate tax cuts should spark needed debate

Liberal Kevin Falcon has set himself up as the business leadership candidate.
Now New Democrat hopeful Adrian Dix has claimed the opposite side.
Dix took one of the bolder positions of both campaigns so far by saying he would raise corporate taxes to fund needed services.
It's striking how little real discussion there has been of the dramatic business tax cuts over the last decade and the resulting service cuts and much higher taxes and fees paid by individuals and families.
It's been a big shift. You can't readily allocate all government revenues to individuals and business. Both pay the carbon tax, for example.
But even a rough cut at the numbers shows companies are paying a far smaller share of the government's bills than they did a decade ago.
In 2001, direct corporate taxes and royalties of various kinds provided about 22 per cent of government revenues. Today, after tax changes by the Campbell government, that's down to about 10 per cent.
Despite inflation and economic growth, corporations are paying about $1 billion less in readily attributable taxes than they were in 2001, a drop of about 20 per cent.
Individuals and families are paying about $8 billion more, an increase of about 60 per cent. (The change isn't just in income taxes. MSP premiums, for example have increased more than 80 per cent; the government is also taking in more indirectly, through B.C. Lotteries, for example.)
You can argue the details. But the shift is undeniable and large. Corporations and businesses are paying a greatly reduced share of the province's bills.
That's by design, and a perfectly legitimate policy. The theory is that lower taxes would encourage companies to invest here, which would mean jobs and growth.
Families would have to pay more to make up for the corporate tax cuts, but, in theory, benefit from a strong economy.
But we haven't had a real public discussion about the tax shift. In part, that's why the HST - which shifted $1.9 billion a year off corporations and onto individuals and families - made people mad.
Dix proposed to claw back about $270 million in corporate tax cuts, which would still leave them paying about $700 million less in direct taxes than a decade ago.
Politically, it sets him apart from the main candidates from both parties, though it won't win business friends and supporters.
Meanwhile, Falcon has presented himself as the candidate of choice for B.C. business.
Falcon has racked up, and promoted, endorsements from a flock of business people. They bought a full-page ad in the Vancouver Sun and his campaign team has sent out press releases celebrating his corporate support.
It's impressive, at least to some Liberal party supporters.
But Falcon was already seen as business-friendly and likely had the support of those supporters. And he risks being seen as short on support from other groups.
What he needs, in terms of winning the leadership, are similar indications from other sectors.
He was the health minister, for example. Where are the patient groups or doctors or seniors' organization offering the same kind of ringing endorsement he's getting from the business sector. Or the women's shelter or teen group in his riding praising his insight and efforts?
Both Dix and Falcon are staking clear positions that reflect the interests their respective party's core supporters, which might help win support in the leadership contest.
That success might not translate as well into an actual election campaign, where the emphasis is on winning over moderate or uncommitted voters.
But Dix has, at least, started a needed debate on tax policy and who should pay for the services government provides.
The tax shift under the Liberals has seen business pay much less and individuals and families pay much more, without a great deal of public discussion of the impacts on the economy and British Columbians.
Footnote: Christy Clark and Falcon sparred a bit over his reliance on business support, or "insiders" as she called them. The bigger issue should be how much they spend to back his campaign. Candidates are limited to $450,000 in spending, but third party spending doesn't count against the cap. Falcon's business backers have already bought ads in his support.


Anonymous said...

There is zero evidence that Liberal tax policy has created jobs. The latest jobless figures bare that fact. Liberal tax policy is simply not sustainable.

Anonymous said...

You fail to give Farnworth credit for contributing to the debate. He is suggesting that revenue from the existing carbon tax be channelled into public transit. This implies shifting some or all of the $928 million raised by the carbon tax from offsetting tax credits and tax cuts for business and individuals, though he hasn't stated how he would do so.

The carbon tax "revenue neutral" scheme is laid out in the provincial budget (see pages 105 and 106).

Hopefully some enterprising reporter will be asking Farnworth which tax cut or credit he would claw back.

Anonymous said...

You would have to be as brain dead as Martyn Brown, not to see the HST has killed this province. Read Laila Yuile's blog, Falcons follies, that will make you heave your cookies. The only clean Liberal candidates seem to be, Abbott and Stilwell as far as we know, at the present time.

Anonymous said...

David Schreck puts some meat on the numbers -- -- Since 2001 BC has represented less than 11% of the Canadian total business investment in machinery and equipment. In the early 80s and early 90s, it was 12%. BC's population is 13.3% of Canada's so it appears that despite corporate tax shifts, BC isn't attracting its share of investment.