While the full impact of the hotly-contested 2012 federal budget is yet to be known, the House of Commons Finance Committee is already moving on to plans for 2013.
Every year, the committee asks Canadians to “contribute their views on the priorities that should be reflected in the [next] federal budget”. This pre-budget consultation process includes a call for submissions and a series of hearings across the country, and results in a report that is tabled in the House prior to the December parliamentary break. The recommendations contained in the committee’s report aren’t binding, but in a majority government such as this, they typically give a pretty good idea of what we can expect come budget day.
For the first time ever this year, the committee moved to an online submission process where individuals and groups were invited to provide answers to “specific questions on which the Committee is focussed at this time”.
As we do every year, Citizens for Public Justice took the Finance Committee up on their offer. While the committee’s questions mainly focused on economic growth, productivity and GDP, CPJ’s response made the case that these goals, in and of themselves, fall short. Economic growth at all costs does not equal well-being. Budget choices are not just economic and political, but also moral.
As a faith-based organization, CPJ believes the moral measure of the debate is how the most poor and vulnerable, as well as God’s creation, fare. We believe everyone, including government, has a crucial role to play in promoting the well-being and dignity of our fellow citizens and protecting our natural resources. As a result, every budget proposal must be looked at from the bottom-up: how will it promote the common good?
Over the next few weeks, our web features will highlight and explore our responses to the Finance Committee’s questions and our related policy recommendations in Promoting the Common Good. This week, we explore the committee’s question on economic recovery and growth.
A Recovery for All
Given the current climate of federal and global fiscal restraint, what specific federal measures do you feel are needed for a sustained economic recovery and enhanced economic growth in Canada?
Economic recovery is important, but it needs to include all Canadians. Three years after the 2008-09 recession, Canada’s recovery has been uneven. The individuals and families who bore the brunt of the recession face continuing uncertainty, including high levels of unemployment and precarious employment, low wages, inadequate Employment Insurance or social assistance benefits, and rising costs of living. Many youth, new immigrants, Aboriginal people, single-parent families, and disabled people are being left behind.
The federal government’s recession recovery strategy has focused on job creation through tax cuts. (The 2011 budget, for example, was aptly titled “A Low-Tax Plan for Jobs and Growth”). Yet the recent trend of continued tax cuts for individuals and corporations has disproportionately benefited a select few, at a high cost to our nation’s economic and social well-being. The rising tide experienced by some is not lifting all boats.
Thanks to continued cuts, Canada now has one of the lowest corporate tax environments in the world (it has gone from around 29 per cent in 2000 to 15 per cent today). Stateside, even the Republican vice-presidential candidate has recently lauded Canada for our low taxes.
As CPJ and others have repeated time and time again, low taxes do not necessarily lead to more jobs, increased investment, or growth that benefits everyone.
Tax cuts have contributed to and exacerbated our budgetary deficit. It is estimated that federal tax expenditures implemented since 2006 will result in foregone federal revenues of $220 billion between 2007 and 2013, including $60 billion in tax savings to Canadian corporations. This amounts to billions of dollars less each year for investments in jobs, education, and social programs. The cost is high and the economic return is little: the government’s own Department of Finance calculated in 2010 that $1 billion in corporate tax cuts raises Canada’s GDP by only $300 million.
To promote a sustained economic recovery for all Canadians, we think the federal government needs to take action to reverse the trend. We propose: (i) a moratorium on any further corporate tax cuts, (ii) repeal recent cuts including those to GST/HST and corporate tax rates, and (iii) phase-out public subsidies for oil and gas companies.
The resulting increases in federal revenue from these initiatives should be used to make investments in people (i.e. job creation, education, and removing barriers to workplace entry), initiatives that will lead to economic recovery and growth, and enhance the common good.
We believe the current situation of federal restraint is overstated. We don’t need more tax cuts; we need revenue-generating solutions that will enable Canada to invest in public goods, infrastructure, and programs that will benefit all.
Check back in the next few weeks for details on our other recommendations!