And so it begins: the long march to the 2015 federal election.
It is still nearly two years away, but the prime minister may as well have started up the campaign bus.
This week, the federal government announced it will be in surplus, conveniently, in time for the next election. And despite it being two years away, the federal Conservatives have announced what they will be doing with that surplus. More tax cuts. Sigh!
Of course the current deficit is, in large part, due to failed tax-cut policies that left the cupboard bare. An empty cupboard means the federal Conservatives have a handy excuse to ignore legitimate needs in the country, like investing in a new Health Accord. That fits fine with their agenda regarding health
care: eroding Canada’s universal medicare system through sheer neglect.
This Harper tax-cut strategy also makes it tough on Opposition parties looking to finance election platforms as politicians continue to shy away from having an adult conversation about taxes.
The Conservative plans for further tax cuts will make Canada’s tax system even less progressive. We saw hints of this plan at the Conservative Party’s recent convention in Alberta.
The Conservatives really just took up where the federal Liberals left off, slashing the country’s corporate tax rate to 15 per cent, down from 21 per cent. The Liberals had already decreased corporate taxes from 28 per cent. Canada now has some of the lowest corporate taxes in the entire world.
The theory was cutting the taxes of some of the country’s wealthiest corporations would result in that money being reinvested into the economy, creating jobs.
Instead, as pointed out by the Canadian Labour Congress and numerous economists, corporate income tax cuts have contributed to a significant increase in cash reserves held by corporations, delivered higher compensation to CEOs, cost Canadians billions in lower than expected government revenues, led to a higher federal deficit and debt, and cuts to public services.
Essentially, Canadians are borrowing money in order to pay for these corporate tax cuts.
According to Statistics Canada, the cash reserves of non-financial corporations increased to $575 billion by the end of 2011. Former Bank of Canada governor Mark Carney called this “dead money.”
So it is clear. The Harper government has taken care of corporate Canada, but what about people, citizens; in particular, future retirees?
Unfortunately and stupidly, the federal government continues to drag its heels with respect to the retirement crisis facing Canadians, and is doing nothing to address the real problems facing Canadian workers.
Despite the fact that all the provinces now agree to expand the CPP as the best option to deal with our growing pension crisis, the federal finance minister continues to toe the line of the Canadian Federation of Independent Business. The business lobby group is adamantly opposed to an expansion of CPP, even though poor seniors are not exactly good business for small- or medium-sized businesses.
Mr. Flaherty says expanding CPP is a good idea, but the timing is all wrong. He has said this before. He claims the economy is not strong enough to support what he calls a “payroll tax.”
This statement begs the question: is Mr. Flaherty now admitting that his government has actually done a poor job of managing the economy?
Secondly, calling CPP a payroll tax is wrong. CPP is not a tax. It is a retirement savings plan.
And if CPP is a payroll tax, what does that make the billions of dollars used to subsidize the financial industry every year? Currently Canadians subsidize the RRSP system to the tune of $18 billion a year, and banks and other financial institutions charge some of the highest management fees in the world to invest your money.
Even bankers have admitted that RRSPs are a failed vehicle for retirement savings for the vast majority of Canadians. Only about 30 per cent of Canadians contribute to RRSPs and the significant majority of those contributions are made by the highest income earners.
All the evidence and pension experts point to an expanded CPP as the best solution to Canada’s retirement security crisis.
Rhys Kesselman, the Canada research chair in public finance with the School of Public Policy at Simon Fraser University, noted in a recent commentary for The Globe and Mail that it’s time to drop
the erroneous conclusion that an increase in CPP premiums is a job killer.
“The historical record is that the CPP premium rate hikes initiated in the 1990s to restore financial balance did not hamper an economic expansion,” he notes. Between 1997 and 2003, CPP premiums were hiked 70 per cent while the country’s employment rate rose strongly and steadily except for a slight dip with the 2001 economic downturn, he explained. Mr. Kesselman noted that current proposals for the CPP expansion would only see a 30 per cent increase, over time, in CPP premiums, but would also result in large increases in benefits to seniors.
“For skeptics and outright opponents, no time is the right time to enhance CPP benefits and ensure the income security of millions of future Canadian retirees. Concern over the effects of CPP premium hikes is unwarranted and should not be allowed to block this important policy reform any longer.”
The time for talk is over. It’s time for action on CPP. It’s time for Mr. Flaherty and Mr. Harper to drop the excuses.
Lana Payne is the Atlantic director for
Unifor. She can be reached by email at firstname.lastname@example.org.
Her column returns Nov. 30.