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Tax cuts benefit Albertans

March 21, 2019
Tax cuts benefit Albertans

Politicians are arguing about business taxes. United Conservative Party leader Jason Kenney is promising to cut the business rate from 12 per cent to 8 per cent. Premier Rachel Notley took to Twitter to decry the tax cut as a mere giveaway “to big corporations and the wealthiest 1%.”

But it’s taxpayers who will settle the debate.

“There’s absolutely no question that lowering the corporate rate will help big businesses,” said Randall McRae, a partner with McRally, a Calgary accounting firm that focuses on small and medium-sized business tax matters. “But it will also help smaller businesses and entrepreneurs. If there are more successful big businesses, they will create the opportunities for smaller businesses and those seeking jobs.

“We all win when the economy is doing well.”

Clearly McRae’s accounting spreadsheets show business tax cuts bring economic benefits for everyone, but what does that look like in real life?

“It’s huge, it gives me more money to spend in the community, I can upgrade my equipment, I can afford to put more people to work,” said Paul Klaassen, President and CEO of PWM Steel Services Ltd. in Lloydminster, when asked how a tax cut would impact his business. “And when you employ more people it puts more money in the community, it’s such a ripple effect.”

Think about what that means in Lloydminster and communities across Alberta. Klaassen is laying awake at night hoping he can hire another employee and there are plenty of Albertans laying awake hoping to get back to work. A business tax cut can help both sleepless dreams come true.

This human reality is something Notley’s Tweet misses entirely.

It’s an important point: policies that lower taxes for all don’t inherently pit big corporations against small businesses or workers. Unlike corporate welfare that involves governments choosing who wins and who loses, all Albertans benefit when governments focus on growing the economic pie by reducing the business tax.

While the idea of making corporations pay more taxes may be appealing, the reality is that business tax hikes also hurt workers. A report published by the University of Calgary suggests that the NDP business tax hike from 10 to 12 per cent costs the average two-income household $830 per year in lost earnings. When businesses are able to keep more of their funds, they have more money to reinvest in new equipment and can hire more employees. That’s what Klaassen sees when he looks at his operations.

Albertans also lose out when investors pass over our province for other jurisdictions.

“You’re going to go where you get the best return on your investment,” said Klaassen.

Governments have known this for years and this reasoning was a key factor behind the province’s past promise to lower the business tax rate to 8 per cent.

“If we don’t [lower corporate income taxes], we risk losing increasingly mobile capital and highly skilled people,” reads the Alberta government’s 2001 budget.

This UCP tax cut would bring the combined federal-provincial rate to 23 per cent. David Staples of the Edmonton Journal makes a stark comparison, “In the so-called socialist state of Sweden, it [the corporate tax rate] is dropping to 20 per cent.”

The UCP business tax cut offers hope after years of higher taxes, stubbornly high unemployment and dismal economic activity. And it sure beats the current economic strategy of increasing taxes and giving away billions to handpicked rail businesses, oil upgraders and petrochemical companies in hopes that those benefits trickle-down to the rest of Albertans.

By helping boost our economy, the business tax cut can benefit all Albertans.

This column was originally published in the Edmonton Sun on March 21, 2019.

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