Canadians won’t likely hear any mention of a corporate tax cut in next week’s federal budget, but the rate will drop automatically from 16.5 per cent to 15 per cent next January. Members of Prime Minister Stephen Harper’s Conservative government have said repeatedly and definitively that the cut will occur as planned when the long-term schedule to reduce the corporate tax rate from 21 per cent was passed in Parliament in 2007.

The tax cuts made sense in 2007 when the nation was running a surplus -but how logical are they now, when Conservative Finance Minister Jim Flaherty is forecasting a $45.4-billion deficit this year on the heels of a $55.6billion deficit last year in a country with a $520-billion debt? Flaherty says it would be “dangerous” and “dumb” to cancel or postpone the cut, but others counter that it would be more dangerous and dumber to go ahead, particularly at a time when the Conservatives have set a goal to eliminate the deficit and attack the debt. If the Conservatives couldn’t afford to put in funding to support Edmonton’s now-aborted Expo 2017 bid because of its deficit-reduction campaign, how does it then justify giving corporate Canada another tax break?

Alberta MP Jason Kenney, currently minister of citizenship, immigration and multiculturalism, says the tax cut is necessary to create jobs. He quotes economist Jack Mintz who suggests that raising the corporate tax rate back up to the 2010 level of 18 per cent, as the federal Liberals have proposed, would kill 200,000 jobs.

Kenney told The Journal’s editorial board Wednesday that every other country in the Organization for Economic Co-operation and Development is in the process of lowering its corporate tax rates. “If we don’t stick to our plan, we will end up with an uncompetitive investment environment.”

The C.D. Howe Institute and the Canadian Manufacturers and Exporters lobby group also insist the continuation of the corporate tax cut is critical to growing Canada’s economy and creating jobs. The manufacturers’ group says the cut will create 98,000 new jobs in just two years and boost investment by $6.2 billion.

Mintz, head of the University of Calgary’s public policy school, is much more conservative in his estimate, forecasting 102,500 jobs over seven years. But last year, coming out of a recession, Canada created 369,000 jobs, so the impact of the tax cut might not seem like that much to the average Canadian voter.

The Liberals say the cut will cost Canadians $6 billion, the Conservatives say it’s more like $4.6 billion -and either way, as the NDP’s Linda Duncan points out, it will add to the total the Conservatives will add to the national debt. Mintz, for his part, thinks the cost will be much less -a piddly $100 million that is offset by a $50-billion increase in capital investment and increased taxable profits.

“A $100-million annual revenue loss that can generate that much new capital expenditure is a slam-dunk in policy terms,” says Mintz.

Of course, most voters aren’t economists and can’t be expected to know whom to believe when it comes to costs and job creation, but a little skepticism may be in order here. Mintz also praises the introduction of the controversial harmonized sales tax in Ontario and British Columbia, and that hasn’t exactly gone over well with voters in those provinces.

Granted, Canada has to compete with other countries to lure investors, but let’s not make this a race to the bottom. Canada’s federal corporate tax rate has already been decreased significantly from the 28 per cent it was in 2004. If the aim is to reduce the deficit without curbing job growth, why not simply defer the change in the corporate rate until the books are back in the black? Already the Canadian Federation of Independent Business is saying that if big corporations are getting another tax cut, small businesses should be getting one as well.

Since this could be the issue that next week’s budget will live or die on, and thus could precipitate a spring election, it behooves us to check to see what Canadians think. An Ipsos-Reid poll published Wednesday by Postmedia News and Global TV Wednesday suggests that 58 per cent of voters don’t support the corporate tax cuts and most want aggressive spending cuts to reduce the deficit. These numbers are in step with a Leger Marketing poll in January that showed only one in 10 Canadians believes companies should pay less income tax than they are paying now. Maybe voters suspect the money saved will end up in shareholders’ pockets rather than go into creating new jobs and expanding businesses.

The prime minister faces a tall order if he expects to win an election on corporate tax cuts. The Liberals have already produced a TV ad showing Harper against a backdrop of Toronto bank towers with a voice-over that says: “Harper is giving your tax dollars to the largest corporations, with a $6-billion tax cut.”

A long stretch limo screeches to a halt and then burns rubber down Bay Street. It might well be carrying away the Conservative chances of achieving a majority government.

Edmonton Journal