Ottawa wrong to bully Ontario on tax cuts, says Larry Brown

Dear Minister:

We have watched, with astonishment and dismay, your heavy handed attempts to force the government of Ontario, and the people of Ontario, to accept your narrow
ideological focus on tax cuts as the only viable economic option.

We understand that you are focused on tax cuts. You have cut taxes so much that your government is now incapable of dealing effectively with the economic downturn that threatens Canada.

The benefit of your tax cuts has gone to the wealthy and the corporate sector. The gap between the wealthy and the rest of us has grown. Corporate profits have been at record levels. At the same time, never in its history has this country lost so many manufacturing jobs. Meanwhile the surpluses you inherited have evaporated, primarily through the cumulative effect of your many and varied tax cuts. This is not a record to be envied or emulated.

We don’t want or need to defend the Ontario government. The government of Ontario was elected because the people of Ontario could no longer tolerate the destruction and debasement of public services that resulted from the tax cut policies of the Harris government that you were part of.

But may we remind you that Canada is a federation where the people get to elect the provincial government of their choice. Unlike your government, the government of Ontario was given a majority. For a federal minister to be so openly hostile to a duly elected provincial government is offensive and even dangerous to the federation.

Of course it is understandable that two levels of government may have different views about economic policy.

But it is unacceptable that Canada’s Minister of Finance would set out to publicly and deliberately undermine confidence in the Ontario economy. Your remarks will make it more difficult to attract new investment in the manufacturing sector in Ontario. Imagine a company trying to decide whether to locate a new plant in Ontario or Michigan. It’s not a stretch to imagine the Michigan state government using your remarks in a video presentation to that company in their efforts to attract the new investment.

The problems facing Canada’s manufacturing sector require a more balanced and comprehensive approach than the simplistic solution of cutting corporate taxes. In fact the studies always show that other factors are more important when it comes to decisions about where to locate.

Study after study has demonstrated that it takes more than just corporate tax cuts to attract new investment and grow our economy. Investments in public health care give Ontario and Canada a huge competitive advantage over the U.S. where health care costs for businesses are spiralling out of control. Investments in public education help to encourage an entrepreneurial spirit and develop the skilled and talented workforce that attracts new businesses. Investments in public child care help build a bigger and more productive workforce. And finally, what our different levels of government do to provide and manage trade infrastructure (e.g. border control, highways, railways, airports) fundamentally matters to attracting new businesses.

The empirical evidence is that Canada is falling behind a number of OECD nations in a wide range of social and economic areas, and a study released recently by the
Canadian Centre for Policy Alternatives points to tax cuts as the culprit.

The study compares high-tax Nordic countries and low-tax Anglo-American countries on 50 social and economic measures and finds the high-tax Nordic countries score better in 42 categories.

According to the study, tax cuts are disastrous for the well-being of a nation’s citizens. For example, the high-tax Nordic countries have: lower rates of poverty, more equal income distribution, and more economic security for their workers; a higher GDP per capita; greater innovation, including a higher percentage of GDP spent on research and development; a higher ranking on their growth competitiveness by the World Economic Forum; higher rates of secondary school and university completion.

Cutting taxes to emulate the United States is a purely misguided approach.

The U.S. falls near the bottom of the 21 industrialized countries in a strikingly large number of social indicators. It also ranks as the most dysfunctional country by a
considerable margin.

In contrast, Finland ranks near the top of the industrialized world in most of the social indicators and has been named the most competitive country in the world by the World Economic Forum four years in a row.

But in the end, attracting new business investment and growing our economy will require a new spirit of cooperation between our political leaders. We urge you to put aside your ideological and political agenda and adopt instead the agenda of the people of Ontario who want the posturing to stop and the public interest to triumph in this most crucial public policy area.

Sincerely,

(original signed by)

Larry Brown
National Secretary-Treasurer - NUPGE