Stephane Dion: Champion of Corporate Tax Cuts

Since the recent by-elections in Quebec, Liberal leader Stephane Dion has been looking alarmingly unsteady. In an effort to reconnect with terra firma on Friday, Dion told a business audience at the Economic Club of Toronto that he wanted to push the corporate tax rate well below that in the United States.

He charged that the Harper government hasn’t done enough to reduce the corporate tax rate. He said that the former Liberal government had been on track to lower the rate from 28 per cent to 19 per cent. (The current corporate tax rate is 21 per cent.) The Tories, he charged, plan to reduce the rate to 18.5 per cent by 2011.

Dion told the applauding corporate crowd that he could do better. Why wouldn’t they applaud? Nothing makes the heart of corporate Canada beat faster that the sight of the two largest political parties vying to see which one can cut corporate tax rates more deeply.

“A low corporate tax rate is not a right-wing policy or a left-wing policy. It is a sound policy,” Dion told his delighted listeners.

That’s wrong, Mr. Dion. It is a right wing policy, culled straight from the playbook of trickle down economics. And Dion is also wrong to claim that reducing the corporate tax rate will induce corporations to spend more on capital equipment. What induces increased capital spending is increased economic demand, not supply-side tax cuts for the rich. The notorious and failed experiments in various kinds of tax cuts for the wealthy in Ronald Reagan’s and George W. Bush’s administrations, and in Mike Harris’ Ontario, demonstrate irrefutably that all you get from such tax cuts is more money in the pockets of the rich and less revenue for governments to spend on infrastructure, job training, and social programs----and the latter, by the way, do increase demand and prompt businesses to invest more. Tax cuts for the rich plunged the U.S. and Ontario into increased government deficits, creating a golden opportunity for wealthy bond holders to make money on the public debt. Tax cuts for the rich reduce economic demand and slow economic growth.

Dion also claimed that corporate tax cuts would strengthen Canadian companies against foreign takeovers. What the cuts actually do is to make them more attractive takeover targets.

In the next few weeks, Stephane Dion may find himself fighting a federal election. During the campaign, his only hope of winning will be to position himself as the leader of a broad coalition of progressive Canadians who are determined to stop Stephen Harper.

At a time when the gap between the rich and the rest is yawning ever wider, progressive Canadians will be appalled by Dion’s emergence as a tax-cutting pal of big business. Quite apart from the merits of corporate tax issue, where does Dion think he’ll find the votes he needs to win?

They’re not on the right, Mr. Dion. You’re not going to pry any votes away from Stephen Harper’s hammer lock on the one third of electors who form his base. The votes you need are in the centre and on the left. In addition to those who want to vote Liberal are many NDP, Green and Bloc voters who might be recruited by a progressive crusade against the Harper government.

One the eve of the Speech from the Throne, Stephane Dion has inflicted a new wound on himself.