Boy have we come a long way. In just a few short years Canadian governments have gone from ridiculing tax cuts to embracing them in their budgets.

The only place where one can find any disagreement about tax cuts these days is with respect to the kinds of cuts being proposed. The latest battle-lines have been drawn between Canadian Alliance leadership aspirants Stockwell Day and Tom Long. Day would like to make personal income tax cuts priority number one. Long says that corporate tax cuts need to be emphasized in order to make Canada "the leading wealth-generating nation on earth."

So who's right Well, both of them of course. Canada has the highest personal income taxes (as a percentage of total taxation) amongst G-7 nations. On the other hand we also have the second highest general corporate income tax rate (43%) in the world - almost 9 points higher than the OECD average. No wonder the Canadian content in your RRSP stinks.

We should, then, be cutting both personal and corporate taxes simultaneously. This is a difficult political sell though because most people think that those big bad corporations should pay their "fair share" and that the "little guy" should get the full tax break.

Well that sounds good but let's get one thing straight -- corporations do not pay tax. Individuals pay tax. This is true because a corporation is simply a collection device by which governments tax the income of the owners of a business. But that does not necessarily mean that it is the owners themselves who suffer a financial loss. For while it is the owners who remit the tax to various governments, it is also the owners who pass this business cost on to consumers through higher prices and to workers in the form of lower wages. Taxes are simply a cost of doing business.

Corporate taxes impose further efficiency problems because they constitute double taxation. Businesses, for instance, pay their taxes and then pay dividends to shareholders that are then taxed a second time. Capital gains are treated in the same way with a company's retained earnings being subjected to corporate income tax and then subjected again to personal capital gains taxes. In Canada, we offset double taxation, in part, through the dividend tax credit and through the inclusion rate for capital gains. A more complete and appropriate solution would be to allow businesses to exclude dividends and capital gains from individual tax returns altogether.

Anyway, the point is that, in the end, everyone pays business taxes. Corporate income tax, capital taxes, business property taxes, and every other tax paid by companies are absorbed by the country's citizens. Giving individual Canadians a tax break, then, also involves cutting taxes imposed on business.

So the alleged conflict between Mr. Day and Mr. Long is really a false dichotomy. Individual Canadians can and will benefit from both personal tax cuts and business tax cuts. The day we finally realize this will be the day that Canada becomes a competitive nation once again.