Economic Advisory Council calls for tax cuts
OK, there has been no such call. Yet. But mark my words, this panel will call for tax cuts as the federal government’s fiscal stimulus, and the government will deliver.
The Economic Advisory Council is not exactly a representative group. No labour representation, no Aboriginal reps, no one from the social or non-profit sector whatsoever. Thus, the groups most likely to be affected by the recession have no voice on this panel.
In fact it is hard to imagine a less representative group. Out of eleven panelists, we have four (!) multi-billionaires. There is James Irving, who along with brother John, sits at number two on Canadian Business’ 2008 Rich 100 list with a combined net worth of over $7 billion. Add in Jimmy Pattison, number five on that list with net worth of just under $5 billion. And Paul Demarais is number eight, with net worth of more than $4 billion. Don’t forget Mike Lazardis of Research in Motion fame, with sits at number fourteen with net worth of $2.6 billion.
Oh wait, this group is representative in a conservative kinda way. There are billionaires from each part of Canada: the Atlantic, Quebec, Ontario and the West. In case you were wondering, there are 53 billionaires on the Rich 100 list, though stock market drops of late may have moved a few off. Those 53 billionaires work out to 0.00016% of the population, whereas 4 billionaires out of eleven panelists is a cool 36%. Finally, the $15 billion or so of wealth of those four (I’m only giving James half the family fortune) is greater than the GDP of about 79 countries (out of 179 countries ranked by the IMF).
I’m a little worried that the others will not fit in. Geoff Beattie is probably OK. He is not a billionaire, but he works for the richest family in Canada, the Thompsons (net worth of over $18 billion) as President of Woodbridge, the family investment company. I do not have any financial details for Ajit Someshwar or George Gosbee but I’m guessing they have tens if not hundreds of millions socked away ($460 million was the cut-off for making the top 100). An interesting question is who is the poorest person on this advisory body and how does their net worth compare to the average Canadian household.
While it is nice that they are working for $1, it is not like any of them need the cash. But if their recommendations get implemented, they stand to make out quite nicely.
Carole Taylor is an interesting choice for chair of this group. As BC Finance Minister she failed to deliver credible budget forecasts, typically understating BC’s budget position by $2-4 billion each year, leaving poverty and homeless to grow at a time when resources have never been easier to come by. Taylor was gifted in the art of tabling gimmick budgets. There was a children’s budget that did nothing to improve early learning or child care. There was a housing budget that built no new social housing. Perhaps the most interesting budget for Taylor was her last one in 2008 when she brought in BC’s carbon tax, which was smeared by the Prime Minister during the election.
What kind of advice can we expect from this panel? Surely Jack Mintz will be the intellectual champion of tax cuts as he was during his tenure heading up the CD Howe Insitute. Like Taylor, Mintz has some carbon tax heresy in his background. He and Nancy Olewiler outlined what later became the Green Shift of the Dion Liberals. That said, we will not see a carbon tax coming forward from this group. Here’s a sample of Mintz’s thinking heading into the exercise:
My favourite would be to introduce a partial refund of the dividend tax credit to owners of pension, RRSP and other savings accounts as well as low-income Canadians who cannot fully claim the credit.
The dividend tax credit offsets the corporate tax paid on profits prior to their distribution to avoid an added layer of tax on income that would subject to personal taxation. Unlike interest that is deducted from taxable corporate profits, dividends are not deductible and therefore subject to corporate tax. If personal taxes are applied to both dividends and interest income at a similar rate, then dividends are effectively taxed more highly than interest once taking into account both corporate and personal taxes. The whole purpose of the dividend tax credit is to ensure that all sources of income paid by the corporations to Canadians are taxed at a similar rate.
While high and middle income investors fully use the credit to reduce personal tax, some investors, especially the elderly, are unable to use the credit, thereby getting little or no relief from corporate taxes applied to returns on stocks.
Perhaps I am too cynical. Maybe this esteemed group of the richest people the country has to offer will put aside their class instincts and show some empathy for the workers and struggling families of Canada. But I doubt it.