Economic Update gives 12% cut to wealthy corporations

As this article shows the tax cuts benefit the corporate sector most and that part of it that is doing best already. As it points out the depressed areas that are not making profits will not being paying taxes in any event so they do not benefit at present by a tax cut. The half percent reduction of the lowest bracket is just giving back what the Harper government had taken away. The Liberals would probably be no better. In fact they want to show the corporations that they will give them even more! THis is from the Harper Index.

Economic update gives 12% cut to wealthy corporations, misses opportunities

Oil industry and banks are chief beneficiaries

OTTAWA, October 31, 2007: Finance minister Jim Flaherty's pre-election "fiscal update" distributed small benefits to individual Canadians and large ones to corporations. At the same time, it committed no new funding to fight climate change, repair municipal infrastructure or improve social programs.

Corporate tax was cut by nearly 12 percent (from 22.12 percent currently to 19.5 percent in 2008). Harper and Flaherty claim this will help firms in sectors like forestry that have been hurt by the rising Canadian dollar, but since these firms aren't making profits, they are not paying taxes either.

"The cut in the corporate income tax rate will primarily benefit the booming oil and gas and mining sectors, which accounts for about one sixth of all corporate pre-tax profits today and will account for even more tomorrow given the demise of much of our manufacturing sector," wrote Canadian Labour Congress economist Andrew Jackson on the Progressive Economics blog. "The highly profitable financial sector accounts for about one third of all profits."

A better alternative for beleaguered exporters, he says, would have been targeted incentives to new investment in training, machinery and equipment. "Those losing money and going under because of the high dollar will get nothing because they have no profits to pay tax on."

Jackson says "corporate Canada gets the lion’s share of the tax cut, and working Canada gets a tiny tax cut at the expense of our social future."

For instance, the announced GST reduction will amount to about enough to buy a pizza a month, according to estimates.

"In the end, this is huge upper-income tax cut," writes economist Marc Lee of the Canadian Centre for Policy Alternatives, "because the ownership of corporate Canada is pretty concentrated in the top decile [ten percent of the population]."

Lee writes that one impact of the corporate tax cut will be to increase the profits of US-based subsidiaries, which will, in turn, "simply be paying that tax to the US treasury instead of the Canadian treasury. Why this is seen as good economic policy is rather baffling."

This contrasts with small benefits for ordinary taxpayers in yesterday's update. "The statement re-announced a cut in the basic personal income tax rate from 15.5% to 15%, and raises the basic exemption by about $1,000, worth $150 to most taxpayers," estimates Jackson. "The $6 Billion spent on the GST rate cut would have helped lower income families much more if it had been directed to an increase in child tax credits or other refundable tax credits which give most to those who need it most."

Michèle Demers of the Professional Institute of the Public Service of Canada (PIPSC) is concerned the update "commits no money to investment in repairs on the country's aging infrastructure, support for scientific research, or measures to ensure the safety of the country's food supply."

Nearly half the bridges in Quebec and a third of those in Ontario are structurally deficient



She points to the Johnson Report into the collapse of the Laval overpass, which indicated that "nearly half the bridges in Quebec and a third of those in Ontario are structurally deficient." She believes "the government should be putting money into the renovation of infrastructure essential for the health and well-being of Canadians ­ like the country's bridge network."

Demers says "Instead of putting $10 billion on the debt, the government should be hiring more food inspectors and veterinarians and taking the necessary steps to ensure that imported children's toys are safe. If the government can't invest in public health and safety now, when it's running huge surpluses, when will it be able to make those crucial investments?"