Tax cuts or health care?

During the leader’s election debate September 27 NDP Leader Andrea Horwath repeated the phrase “blank cheque” when it came to corporate taxes.

The NDP want to roll back recent corporate tax cuts to 14 per cent. The Tories and Liberals favour a 10 per cent rate.

The NDP argue that nothing has been required of corporations for the tax cuts.

While the assumption is that corporations would use this money to reinvest and create new jobs, the reality is this never happened when Paul Martin started slashing corporate tax rates. Nor have we seen an incremental increase in investments as Ontario started down the path of corporate tax cuts.

In fact, corporate reinvestment seems to have trailed off in lock step with cuts to corporate taxes.

The NDP say they would provide tax credits to corporations that actually created jobs.

Last year former Bank of Canada Governor David Dodge recommended against corporate tax cuts at the federal level. He told his Queen’s University audience “the final scheduled cut in the corporate tax rate might be foregone (or postponed well past 2013) without losing tax competitiveness as it now seems unlikely that major cuts in the U.S. or European corporate tax rates will take place. These additional revenues late in the decade would help to maintain the federal balance.”

Dodge made it clear that Ontario would have a much more difficult time maintaining services without increasing revenues.

Given the Federal government is committed to reducing corporate taxes regardless of Dodge’s advice, the provincial NDP argue that these cuts could effectively work as a transfer of tax points to the province. The effect should be close to neutral on the bottom line of the province’s corporations.

Last Sunday the NDP released a costing of their programs. In that costing they included a chart of comparative corporate tax rates. The combined Ontario/Canada corporate tax rate would still be far below most jurisdictions, and far below the United States. Only the UK and China would be lower among the 10 country comparison.

If corporations are not creating growth with the tax cuts given them, then effectively revenues either need to be replaced – often from the middle class – or services have to be slashed – which would have an even greater impact on the middle class and poor.

In anticipation of this election, OPSEU’s Hospital Professional Division has been waging a campaign that asks Ontarians which they prefer: tax cuts or health care?

As the closing days of this election approach, the question is becoming particularly relevant.

All three parties are promising some degree of tax cuts, affecting revenues needed to pay for services such as health care. Economist Hugh MacKenzie has costed these cuts – 80 per cent of the fiscal room in the Tory platform is going to tax cuts, just under 40 per cent for the NDP, and 16 per cent for the Liberals.

The funding promises made by the three major parties for health care are weak, particularly given they are all following an austerity baseline the Ontario auditor calls “aggressive.” The best – the NDP – will still fall considerably short of real cost pressures. The Ontario auditor confirmed this in his pre-election report, suggesting hospitals may either have to cut services or run up debts based on the three year core funding projections contained in the spring budget. He did not understand how funding increases to long term care and home care could be dramatically slashed when these two alternate forms of care were counted upon to reduce expenditures at the hospitals.

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Want a “Tax Cuts or Health Care?” bumper magnet or button? Check with your OPSEU health care local. You can also contact rjanson@opseu.org if copies of these materials are not locally available.

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