never been an OPSEU campaign like this one.
for Corporate Tax Cuts” is funny. It’s
provocative. And it’s online. Its aim is to
cut through the noise of modern life with a
simple message: Ontario can’t afford
corporate tax cuts.
members are used to fighting for public
services. We’re used to fighting for good
jobs. We’re less used to commenting on wider
issues. So why are we talking about
corporate tax cuts? And why now?
answer is simple. If we don’t, there is no
way we can stop the steady erosion of the
public services Ontarians depend on. There
is no way we can protect our jobs and
working conditions. There is no way we can
build a fairer, more inclusive Ontario.
services and jobs are strongly linked to two
things: the fiscal policies of government
(how it gets money and how it spends it),
and the health of the economy.
Obviously, the two are related. But not in
the way some people say.
business section of any newspaper and you
get one particular view of the economy.
Business, the papers say, will invest more
and create more jobs when government stays
out of the way. This means signing free
trade deals, cutting regulations, selling
off public services, and keeping taxes low.
This grows the economy, business says. When
that happens, government can collect the
taxes needed for health care, education,
highways, and so on.
the theory. The reality is very different.
the world’s big economies became big by
following these policies. In every case,
government laid the groundwork for business
success through protective tariffs, spending
on infrastructure, and other help.
Indeed, Canada grew that way for a hundred
call the “free market” has always depended
on public support. Picture a country with no
public roads, no public water systems, no
electricity developed through public
subsidies, no public education, and no
courts to settle disputes.
picture that country’s economy. It’s a poor
people say that the money for children’s aid
or provincial jails comes from the private
sector, the truth is not so simple. In a
modern economy, the public and private
sectors are integrated. They depend on each
the money for public services and jobs comes
from taxes (including taxes on public
employees). How those taxes are collected,
and from whom, is a central concern for
corporations are always a sensitive issue,
not least because business has political
power. Corporations have easy access to
Prime Ministers and Premiers. They’re not
shy about demanding what they want.
Corporations want profits, and one way to
increase profits is to reduce costs through
lower corporate taxes. Problem is, lower
corporate taxes mean either a) higher taxes
for people, or b) less money for public
Corporations prefer option b). That’s
because taxes don’t go to corporations, they
go to public services. Money spent on public
services (like home care) is money that’s
not spent on private sector goods and
services (like big-screen TVs).
Corporations also like option b) because
lower taxes lead to public service cuts.
These cuts often create investment
opportunities for business (running health
labs, for example).
tax cuts boost profits automatically. These
profits, corporations tell us, pay for new
investment, which creates jobs for working
people. Therefore, workers should support
lower corporate taxes, right?
what we’re told. It’s certainly what Premier
McGuinty thinks. Their plan gives
corporations tax cuts worth more than $8
billion a year.
Over half of this tax cut comes from the
Harmonized Sales Tax, which the Ontario
Chamber of Commerce lobbied for and got.
More than $2.4 billion of it is a cut in the
Corporate Income Tax rate.
for Corporate Tax Cuts” is all about this
$2.4 billion cut. All of the $2.4 billion
goes to profitable corporations; most of it
goes to corporations who quite clearly do
not need it. The Big Six banks, for example,
made $14 billion in profits in 2009, and
that was after they paid out $8 billion in
bonuses. There is no reason to think that
giving more money to Rogers Communications
(2009 profits of $1.5 billion) or Great West
Life ($1.7 billion) will create any jobs.
These tax cuts are strictly no strings
the ways the government could spend $2.4
billion, corporate income tax cuts are just
about the poorest choice. For every dollar a
government spends on corporate tax cuts, we
get 30 cents back in economic growth. In
contrast, every dollar we spend supporting
unemployed and low-income people brings
$1.70 in economic growth.
to see why. People who are broke spend every
penny they have. People and companies who
are well-off do something else. They might
go on trips to Paris. They might invest in
other countries. They might pay down debt.
They might save their cash until a better
idea comes along. None of that creates jobs
here at home.
is, corporations have enjoyed corporate
income tax cuts, federally or provincially,
for the last decade. But in that time, the
rate of investment in Ontario has actually
gone down (see chart).
tax rates are not preventing investment in
Ontario. According to the KPMG consulting
firm, Canada has the lowest corporate income
taxes and the second-lowest overall tax
costs for business of 10 competitor
countries they studied.
The Toronto region has the fifth-lowest
business taxes of 41 large international
cities KPMG looked at. Just as importantly,
taxes only account for (at most) 14 per cent
of location-specific costs for a business,
corporate tax rates are already competitive
– and then some. If low business costs were
all it took to boost the economy, we’d be
leading the pack. We’re not. The countries
that are blasting their way out of the
recession are Japan and Germany. They both
have what some Canadian politicians would
see as insanely high tax rates.
thing corporate tax cuts guarantee is the
transfer of money to corporations from the
rest of us. This can only lead to weaker
public services and greater economic
inequality is the number one workforce trend
of the last 30 years. By and large, the
source of that inequality is the transfer of
money from workers’ wages to corporate
profits. The share of the economy going to
wages is lower than ever. The share of the
economy going to profits is higher than
chunk of that money just goes to high
salaries for corporate executives. In 2009 –
during the recession – the typical top-100
CEO in Canada made $6.6 million. That’s 155
times what the average Canadian worker made.
richest one per cent – one per cent – of
Canadians make 17 per cent of the income in
same story the world over. Workers are
seeing cuts to the public services they
need, cuts to wages, cuts to pensions and
benefits, more part-time and temporary jobs,
and more unemployment and underemployment.
can see that something is wrong.
McGuinty wage freeze will transfer money
from college admissions clerks and workplace
safety inspectors into the pockets of
corporate CEOs. But what’s happening today
is not about OPSEU members. It’s about all
working people. This year, corporations told
us that nickel miners in Sudbury were paid
too much. They told us grocery clerks at
Loblaws were paid too much. Heck, they even
told us reporters were paid too much.
think that, after driving the economy into a
brick wall, global corporations would take
their foot off the gas and work for a fairer
economy. Instead, the reverse is true.
Corporations everywhere are using the crisis
to increase inequality. That’s what the
protests in Europe are about. Ireland is a
perfect example: first, ordinary citizens
bailed out their reckless banks; now they
are paying for the bailout with “austerity”
measures that will still be hurting people a
generation from now.
home, it’s clear that many of Premier
McGuinty’s priorities are upside down. He is
pushing his corporate tax cuts through at a
time when 15 per cent of Ontario’s children
– 412,000 of them – live in poverty.
Every month, 375,000 people visit food
banks. With so much wealth in this province,
to polling, the love affair between
Ontarians and the corporations who rule us
is over. In interviews with 1,000 Ontarians
last August, the Angus Reid polling firm
76 per cent agreed that
existing corporate income tax cuts
should be postponed;
81 per cent would
support higher corporate taxes if it
were used to pay down the deficit;
75 per cent thought CEOs
should make sacrifices to pay down the
75 per cent support a 10
per cent surtax on those earning
$300,000 a year or more.
more working people are pushing back against
economic inequality. More and more of us can
see what’s causing it. “People for Corporate
Tax Cuts” is part of a growing global
resistance against the corporations who
really run things.
Robinson is OPSEU’s Political Economist
For example, Britain up to the 19th
century, the United States in the
first half of the 20th, Japan and
South Korea, in the second half of
the 20th, and now China in the 21st.
The best summary of this
history is in two books by Cambridge
University economist Ha-Joon Chang.
See Ha-Joon Chang, Kicking Away the
Ladder (London: Anthem Press, 2002)
and Ha-Joon Chang (Bad Samaritans:
The Myth of Free Trade and the
Secret History of Capitalism (New
York: Bloomsbury, 2008). Dr. Chang
talks about his new book, 23 Things
They Don’t Tell You About Capitalism
Sir John A. Macdonald’s “National
Policy” built the Canadian Pacific
Railroad, upgraded harbours, and
subsidized the shipping industry
(all with public money) to open up
markets for manufacturers in central
Canada behind a tariff wall that
kept out more-developed competition
from the U.S. For a quick summary,
check out the Canadian Encyclopedia
And of course business makes no
profit on publicly-run services.
Dwight Duncan, Ontario’s Tax
Plan for Jobs and Growth (Toronto:
Queen’s Printer for Ontario, 2009)
Calculated from Ontario Ministry of
Finance, Ontario Economic Accounts
(July 2010), “Historical Tables.”
(Figures in 2010 dollars).
The 10 countries studied were
France, Germany, Italy, Japan, the
Netherlands, the United Kingdom, and
the United States.