The great Canadian giveaway continues. Canada's most profitable corporations - such as banks, oil and mining companies - are about to get another big gift from the Harper Conservatives.
How low will corporate taxes go before common and economic sense prevails?
On New Year's Day, the federal corporate tax rate will be reduced once again as it has been every year since the Conservatives have been in power, dropping from 21 per cent in 2006 to 15 per cent in 2012.
Canada now has among the lowest corporate tax rates in the industrialized world, lower than even the United States.
The Parliamentary Budget Office says the reduction to 15 per cent in 2012 from 18 per cent in 2010 has cost the government $11.5 billion in annual tax revenue.
It has significantly contributed to the federal deficit that is being used as the excuse to slash government programs and services and lay off thousands of federal civil servants.
What is becoming clearer and clearer is, despite billions and billions in tax breaks, corporate Canada, for the most part, is not creating the jobs it could be, not spending on capital investment or raising wages.
Indeed, at the end of 2011, there was real concern that the cost of living (inflation) was now outstripping wage increases. This, combined with rising household debt and massive government spending cuts and layoffs, is not exactly a recipe for a healthy economy in 2012.
As Bank of Canada Governor Mark Carney said before Christmas, corporate Canada must do a better job of investing its hoarded cash, estimated to be about half a trillion dollars.
Mr. Carney's pointed message to Canadian corporations belies the hype from the Harper Conservatives that these tax cuts are producing jobs or new business investment. In fact, Mr. Carney was clear, it is Canadian consumers who are propping up the Canadian economy, not corporate Canada.
In fact, a study by Canadian economist Armine Yalnizyan shows that average annual business investment was about the same at the end of 2010 as it was in 2000, despite a decade of corporate tax cuts worth billions and billions of dollars.
The proof, as they say, is in the pudding. Many studies are now questioning the economic benefits of rapidly declining corporate tax cuts.
A study by economist Jim Stanford, for example, found that Canadian corporations have received a whopping $745 billion in excess, uninvested after-tax cash flow since 2001 - money not reinvested in real capital projects in Canada.
This sluggish business spending is one of the key reasons Canada's recovery from the recession has been uncertain and lethargic, says Mr. Stanford.
"Supplementing that cash flow through further tax cuts is like pushing on a string. Those tax savings would only add to the large sums of uninvested cash flow Canadian businesses already possess."
Canadians should question the wisdom of handing out more tax cuts to banks, oil and mining corporations. They don't need it.
Canada's banks and financial sector will rake in about one-fifth of this year's $2.5 billion tax cut. Yet Canada's big banks had profits of about $22 billion in 2011 and handed out about $9 billion in executive bonuses. The last thing they need is another $500 million through even lower taxes.
Oil and mining companies, also extremely profitable, will pull in about $300 million extra in 2012 as a result of the tax cut.
And the Canadian citizen will have to pay for these reckless tax breaks through reduced services, like the loss of the maritime rescue centre in Newfoundland and Labrador.
It says a lot about the Harper government's priorities.
The tax cuts are costing us jobs, services and much needed investment in municipal infrastructure, including transit, roads, and sewage treatment facilities.
And corporate Canada is not delivering on its end of the bargain. It has failed to create the jobs it said it would if the federal government reduced its taxes.
These no-strings-attached tax cuts are causing more harm than good - robbing the public treasury of billions of dollars - and yet the Harper Conservatives continue to ignore the facts and lie to Canadians about the benefits of corporate tax cuts.
Another study by economist David Macdonald of the Canadian Centre for Policy Alternatives tracked 198 of the 245 companies on the S&P/TSX composite between 2000 and 2009. It found that those 198 companies are making 50 per cent more profit and paying 20 per cent less tax than they did a decade ago
"Despite their growing profits and massive tax savings, the number of jobs created by Canada's largest corporations was lower than the average employment growth across all sectors of the economy," says Mr. Macdonald. "In essence, the largest beneficiaries of corporate tax cuts are dragging down Canadian employment growth."
Employment is one thing. Wages are another. And wages in Canada, despite billions in corporate tax breaks, are not even keeping pace with inflation.
In his pre-Christmas television interview, Stephen Harper warned that 2012 would be a tough economic year for Canadians.
What he neglected to tell us is he and his government will be the cause of a good deal of that pain.
Lana Payne is president of the Newfoundland and Labrador Federation of Labour. She can be reached by email at lanapayne@nl.rogers.com. Her column returns Jan. 14.
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The "Laffer Curve" is NOT universally accepted, and is called the "laugher curve" at the "joke" that paying less taxes means businesses will eventually pay more taxes. The whole point of the article is that all the tax breaks given to the big corporations has been hoarded as cash, not re-invested in re-tooling factories, doing research and development, etc.