Ignatieff on Corporate Taxes
Last night, I went to sleep early before watching any coverage of the Liberal Policy Conference. This morning, a well-rested Erin Weir marched into the office with such purpose that I did not even look below the fold on The Globe and Mailâ€™s front page. Imagine my pleasant surprise when I got an e-mail about Michael Ignatieff proposing to cancel future corporate tax cuts.
The Conservative government is slashing the federal corporate tax rate from 22.12% to 15%, which would reduce annual revenues by $13.7 billion ifÂ fully implemented. More than half of that cut, from 22.12% to 18%, has already been implemented. However, as I estimated a month ago,Â one could save $5.8 billion annually just by maintaining 18%.
Before getting too excited, it is worth noting that the Liberalsâ€™ written proposal takes credit for introducing almost all of the corporate tax cuts enacted to date. Here is the specific promise: â€œFreezing corporate income tax rates to their current level until Canada can afford to lower them further.â€ While the Liberals cite dollar amounts (â€œbetween $5 – 6 billion annuallyâ€) that assume 18%, they do not actually commit to 18%.
The â€œcurrent levelâ€ will be 18% only if there is a federal election this year, but it falls to 16.5% next year. If there is no election until 2012, the corporate tax cuts will have been fully implemented and Ignatieffâ€™s promise would be moot (as Chantal HÃ©bert notes). The â€œuntil Canada can afford to lower them furtherâ€ provision also gives the Liberals extensive wiggle room, especially if the federal deficit comes in smaller than projected.
More generally, the Liberals are not to be trusted on this file. For a decade from 2000 until yesterday, the federal Liberals loved corporate tax cuts. Dalton McGuinty has demonstrated at the provincial level that a Liberal politician can quickly manoeuver from cancelling corporate tax cuts to reinstituting them, even in the face of a huge budget deficit.
Until yesterday, only the NDP opposed them. As recently as the last federal election, the Liberals prided themselves on promising even deeper corporate tax cuts than the Conservatives. The only disagreement between the two dominant political parties was how far to cut corporate taxes. Today, the debate is whether or when to cut corporate taxes.
For those of us who have long been fighting the lonely war against corporate tax cuts, Ignatieffâ€™s announcement is an important advance. The challenge now is not only to hold this advance by defending the limited measure that Ignatieff has tentatively embraced, but to exploit it by making the case forÂ returning to at least the more sensible federal corporate tax rate ofÂ 22.12% that Canada had before the economic crisis.
UPDATE (March 30): Cited by Canadian Press