UPDATED: A Private Sector Addiction

 

I often wonder how many Ontarians realize that we are led by a premier addicted ideologically to the private sector. A man hobbled by a limited education and intellectual breadth, Doug Ford's paltry vision is one that extols all things private at the literal expense of the public. The signs are many.

One need only look at the Greenbelt Scandal, that, before it was stopped, was designed to rob citizens of necessary and valuable green space, wetlands and nature in general so that Doug Ford's developer friends could benefit to the tune of many billions of dollars. There is also the 'redevelopment' of Ontario Place handed over to a German company, Therme, to build a spa for the minority of people who will be able to visit it. And nothing is too good for the private sector; in the case of Therme, they have been given not only a 95-year-lease (whose terms are being kept secret from the public), but also a wholly taxpayer-funded underground parking facility that will cost over $650 million, as well as other untold costs that will no doubt be uncovered in future Auditor-General reports,

I could go on, but the most recent proof of Ford's follies are reflected in his obsession with privatizing more alcohol sales, despite the billions in revenue the LCBO puts into public coffers. And now, as a result of his monomania, we have a strike at the LCBO, one I suspect will go on for some time. It is going all according to plan.

The longer the strike goes on, the more opportunities thirsty Ontarians will have to discover new, private sector sources to slake their collective thirst. And as resentment grows over the LCBO's monopoly on liquor, fewer people will be concerned about the concerns that led to the strike - the protection of union jobs paying between $17 and $30 per hour, although apparently only 30% of those jobs are permanent and have benefits. Yet even that modest remuneration seems too much for Doug, because it is not going to the private sector.

Robert Kahnert of Markham, Ontario, offers his thoughts on the damage Ford's approach to policy is doing to this province:

What happened to our once civil society? We now live in an Ontario no one recognizes. Everywhere you look there is a crisis — homelessness, affordability, health care, education, building and infrastructure decay.

How did things that were once so good get so bad.? The answer is right in front of us. Most of the public wealth was transferred to the wealthy.  We have been fed a steady diet of tax cuts, deregulation,  and the need for privatization to get the “innovation and private sector efficiencies” with promises like “all boats will be lifted by the rising economy.” As we have clearly seen, false promises. Not only has our civil society been severely damaged but so had trust in democracy .

In the last provincial election, only 17 per cent of the population voted for Premier Doug Ford.  After slashing government funding to public services  starving them into crisis just to pay for tax cuts to the wealthy and their corporations, they then present privatization as the solution to a problem they created. The only thing deregulation and privatization does is create more profit-making opportunities.

The gap between the haves and have-nots is huge and widening at an ever-increasing rate.

 Small tax cuts to the general population have been used as a cover for massive tax cuts to the wealthy and their corporations.

 Reversing tax cuts is not raising taxes, it is restoring revenue to rebuild our once civil society. Beware any politician promising tax cuts. We do not have a wealth creation problem. We do have a very serious distribution of wealth problem.

Where is the leadership? We have the power. Don’t leave, speak up and vote to stop this insanity.

Paul Kahnert, Markham

Worshipping at the altar of unrestricted free enterprise comes with great costs. It is time that more of us realize the extensive damage such fealty does to the things we hold in common, and act to stop any further erosion of our services, values and culture that seem so foreign only to those who 'serve' us.

UPDATE: If you're still with me, Brittlestar has an entertaining but accurate video about the importance of the LCBO to Ontario's development:

It's Time To Ask The Right Questions

The old myth that tax cuts, especially of the corporate kind, create jobs, continues to be circulated. Indeed, here in Ontario, PC leader Doug Ford is promising to reduce the corporate rate from the already historically-low 11.5% to 10.5% "to bring jobs back to Ontario."

In Australia The Canberra Times' Ben Oquist says it is time to reframe the tax discussion by posing a series of questions aimed at showing the destructive nature of such cutting:

Every proponent and lobbyist for the policy should be asked what social program or infrastructure project should be cut, or what other tax should go up to pay for boosting post-tax profits of large business. Indeed Treasury’s own modelling - often cited to support the tax cut legislation - assumes that either personal income taxes will increase or government services will be cut.

We hear almost exclusively from the "winners" of a company tax cut. But the public cannot be expected to make an informed choice as to whether this is the best way to create ‘jobs and growth’ if we do not know, specifically, where the off-setting cuts will be made. Will it be billions less for schools, or hospitals? Or will it be the infrastructure spend for our fast growing population that misses out?

Only the untutored mind will accept Doug Ford's bromide of tax cuts with no pain:

... while Ford likes the tax cuts, he doesn’t like the carbon tax (or any other tax), leaving a $10-billion hole in his budget.

Not to worry, says the self-proclaimed stopper of gravy trains. Ford insists the better part of the shortfall – about $6 billion – could be covered through the elimination of so-called inefficiencies.

In Australia, by contrast, some of the corporate sector is beginning to understand the folly of such short-sighted tax measures:

This week a survey of Australian company directors found that infrastructure spending, not tax cuts, should be the priority in this year’s federal budget.

Many company directors also know that ultimately business can only flourish if a decent society is maintained and that this requires a strong role for government providing quality services, training, education and modern infrastructure. This of course requires a strong revenue and taxation base to fund it.

Why don't corporate tax cuts work in creating jobs, jobs, jobs?

History shows that corporate tax cuts are largely spent on stock buybacks, increased dividendsand acquisitions, all of which only helps to benefit wealthier shareholders – not workers or the community.

That has been the Australian experience, and the same reality is unfolding in Trump's America:

Figures already released following Trump’s tax cut show that investment is down but there has been a frenzy of share buybacks, increased dividends combined with mergers and acquisitions that increase CEO power and drive inequality even higher.

For more discussion of the above, check out this New York Times article, which observes that

American companies have announced more than $178 billion in planned buybacks — the largest amount unveiled in a single quarter, according to Birinyi Associates, a market research firm.

Informed and serious discussion of taxation is hard to come by these days. Instead, shrill pronouncements from demagogues predicting financial Armageddon if fair taxation is imposed hold sway.

Clearly, it is time for all of us to put on our thinking caps, pierce through the hysterical proclamations and begin behaving like adults, not children who favour sweet lies over bitter truths.

A Timely Reminder Of Tim Hudak's Magical Thinking

While we should be back from our trip tomorrow in time to catch the Ontario election news coverage, this seems an opportune time to remind readers of the kind of magical thinking so favoured by extreme right enthusiasts such as young Tim Hudak. Tim, as you may recall, has made even lower corporate taxes a major part of his plan to create one million jobs, despite the fact that Ontario's rates are among the lowest in North American, and despite the fact that no apparent empirical data supports the equation that lower business taxes create jobs.

Here is a letter from today's Star that I think makes the point rather nicely:

Leaders make one last push as campaign winds down, June 10

The Fortune 500 companies in the U.S. recorded $1.08 trillion in profits last year. That was an increase of 31.7 per cent over the year before. During that time, these same companies increased employment increases of 0.7 per cent.

A similar picture exists on Canada. In 2001 corporate tax rates were 22 per cent. Today they stand at 15 per cent. We’ve lost $6.1 billion in government revenue while corporate profits have skyrocketed to $625 billion.

Tim Hudak talks about creating one million jobs through a lower tax rate. During the Mike Harris years in Ontario this philosophy did not work out very well. The provincial debt during the Harris years went from $90.7 billion in 1994-95 to $130.6 billion is 2002-03. This, while cutting many jobs and services and giving the province the legacy of Walkerton among other atrocities.

Former Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney tried to convince Canadian corporations to spend some of the “dead money” they have been sitting on after accumulating such large profits over the years. To date, the corporations have not responded.

For years, right-wing government leaders from Margaret Thatcher to Ronald Reagan to Mike Harris have been selling the supply-side economic lie. It didn’t work for them and it won’t work for Tim Hudak. A first-year economics student could tell you the reason for this. The rich don’t tend to spend additions to their revenue. The poor do. The rich accululate this money as the corporations in Canada have been doing for years.

In the Conservative attack on Kathleen Wynne on the radio, they end by asking, “Can you afford to vote for Kathleen Wynne?” I am wondering if I can afford not to.

Carl Nelson, Huntsville

On Corporate Propaganda and Tax Avoidance

It is the fashion among our corporate overlords and their rabid right-wing courtesans to utter a trite phrase that, because it is repeated so frequently, is taken as truth by many: We don't have a revenue problem, we have a spending problem. Like the magician who relies upon misdirection to perform the seemingly miraculous, the corporate cabal purports to prove, through both its rhetoric and 'studies' done by its think tanks (think The Fraser Institute in Canada, The Cato Institute in the U.S. as examples), that taxes are 'job killers' and that the key to robust economies and solid employment numbers is low taxation.

Of course, the falsity of such assertions has been amply demonstrated, most recently by Bank of Canada Governor Mark Carney, who has weighed in on more than one occasion about the abysmal rate of business investment in new machinery and equipment — considered vital to boosting growth, creating jobs and making the economy perform more efficiently. This sad state despite the fact that Canada has one of the lowest corporate tax regimes in the world.

While there will always be the true believers who subscribe to the myth of the efficacy of marketplace discipline and an ultra-low tax regime, I suspect more and more are starting to realize that the corporate agenda has nothing to do with the betterment of society or the support of democracy, and everything to do with its own self-aggrandizement. As reported last week in The Toronto Star, The OECD (Organization for Economic Cooperation and Development), consisting of 34 countries, issued a report condemning the practice of corporation, including giants such as Google, who are shifting profits to places where they pay little or no tax, places such as the Cayman Islands, Bermuda, and Barbados.

As the report points out, not only is this costing the countries in which these corporations do business billions of dollars in lost revenue, it is also encouraging a perception that the domestic and international rules on the taxation of cross-border profits are now broken and that taxes are only paid by the naive, and if nothing is done about the situation ordinary taxpayers might refuse to pay their share of taxes on the grounds that the system is unfair.

So there you have it: corporations with a patent disdain for the countries who make their businesses both possible and viable, without conscience or concern for the massive damage their schemes do to the social and economic fabric of those countries, beholden only to their own bottom lines and their shareholders.

If such misbehaviour is not an indictment of unfettered capitalism, then I don't know what is.

The Folly of Corporate Tax Cuts

Part of the orthodoxy of right-wing ideology is that corporate tax-cuts are an unalloyed benefit to the economy. The argument goes that the lower the tax regime, the more jobs that are created.

While that ideology has been proven patently false in Canada, for those seeking some well-reasoned arguments the next time a 'true-believer' captures your ear, look no further than a fine series of letters published in today's Star, only one of which I am reproducing below:

Corporations optimize their operations to maximize after-tax profit. When corporate profits are heavily taxed, reinvesting in the business provides a tax write-off that has a powerful risk damping effect; simultaneously, cash hoarding is penalized. Companies have no choice but to reinvest their profits.

When corporate tax rates are unsustainably low, reinvestment risks are not counteracted by tax breaks and there is no penalty for hoarding. It becomes hard to justify new staff and equipment when the lower-risk, higher-profit approach is to simply hoard cash.

This is not ideology; it is the mathematically inevitable result of optimizing for maximum after-tax profit. That Flaherty has not made the connection between the last two decades of tax policy and the current hoarding problem is rather surprising.

Matthew B. Marsh, Kingston

A Sage Observation

Paul Kahnert of Markham has an uncommonly apt observation in this morning's Star, one that I'm sure the ideologues leading us both federally and provincially will choose to ignore:

Re: Canada’s idle threat, Business Aug. 25

It’s time to reverse corporate tax cuts. David Olive’s article was proof positive that tax cuts don’t work. Weren’t tax cuts for corporations supposed to make them “competitive” and create lots of job for Canadians? We’ve been conned. The only thing tax cuts created was massive wealth for corporations and the top 1 per cent.

Corporate tax cuts have been one of the main contributors to the $526 billion of profits sitting idle in their bank accounts. Right now provincial and federal deficits are running at about $65 billion a year. All governments are crying poor and say they can’t afford to pay for public services like health care, education and infrastructure like water, sewage roads and bridges. Baloney.

We don’t have a deficit problem. We have a distribution of wealth problem. Governments need to tax that money back and get on with the job of building this country with good jobs.

And all of us need to stop voting foolishly for politicians who keep promising us tax cuts.