We are nearing the end of the spring session of parliament during which much of my time was spent examining and promoting various bills, including my pension security bill C-501. Every so often though I find it usefully to take a step back from the day to day work and look at the effects we have felt as a result of legislation passed in the House of Commons some time ago. Let’s take a look this week at the Harper government’s corporate tax cut and the banking industry.
Since assuming office in 2006, Stephen Harper introduced more than $60 billion in corporate tax cuts over a five year period. Like true amateurs, the Harper Conservatives thought that record surpluses were a problem that had to be dealt with as quickly as possible, and blew the treasury by giving $60 billion away to the most profitable companies in Canada.
The main problem is that Conservative Party MPs and many of their dyed-in-the wool supporters fail to see corporate tax cuts for what they are – spending that reduces the fiscal capacity of governments to address other priorities or reduce the long term debt we hold as a nation. Seeing them for what they are, the corporate tax cuts are a decision that pads the bottom line of profitable companies at the expense of health care, pension security, the forestry sector, and debt repayment to name but a few.
Given the Harper government’s awful choice to blow $60 billion on these unnecessary corporate tax cuts, New Democrats decided to oppose them each time they came up for a vote – mostly often in the federal budgets. We opposed these cuts because studies have shown, repeatedly, that corporate tax cuts are among the least effective ways to boost economic growth, because we knew that spending this much money on one budget item would create a large deficit (yes, even before the economic crisis), and because we know that there are too many other areas of the economy and our society that are in a state of crisis and need investment – health care, forestry, and pension security among them.
Banks are the ideal case study for the issue of corporate tax cuts because corporate income taxes are only paid on profits, and banks are among the most profitable companies in Canada. Here are some profits for the biggest banks for the 2009 fiscal year;
TD Financial – $5.6 billion
Royal Bank – $3.8 billion
ScotiaBank – $3.5 billion
Bank of Montreal – $1.8 billion
CIBC – $1.2 billion
National Bank – $854 million
Taken together the total profits of the 6 most profitable banks in Canada reached a full $16.75 billion in 2009 alone. When you factor in a reduction in their corporate income tax rate, from 22.12% in 2006 to 19% in 2009, then these six banks received an extra $577 million – in 2009 alone – which could have went to health care, forestry, or pensions. What’s more is that the banks will receive this money each and every year moving forward, and even more as their profits increase. Couldn’t this money be better spent? Is helping these profitable companies worth us going further into debt as a nation?
Instead of investing money where it is needed the Harper government has thrown money at companies that are raking in record profits quarter after quarter. This spending is not targeted and the only companies that receive any benefit from the cuts at all are those that declare profits and income – tough luck AbitibiBowater.
When you add up the legacy costs of these tax breaks, across all sectors of the economy, then you have $60 billion over five years in lost government revenue. This wasteful spending, especially when it is added to the $2 billion being spent on a three day G8-G20 meeting among other fiascos, is the reason why the federal government is posting record deficits, why the Canadian forestry sector continues to bleed jobs to the US, and why millions upon millions of Canadians are about to retire in poverty.
So the big picture as I see it today – the Harper government doesn’t care about our tax dollars any more than the Liberal government they replaced; they’re just wasting it in a different way. They have chosen to spend billions of our tax dollars helping those who don’t need it (banks and oil companies) while ignoring those who actually do need some help during the economic crisis (forestry, the sick, and retired Canadians). Governing is always about choices, and looking at the big picture and where our country stands today I have to say that the Harper Conservatives have made the wrong ones since coming to power.
John Rafferty MP
Thunder Bay Rainy River