OPINION
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MARCH 2020 A division of Invest Northwest Publishing Ltd. 200-3060 Cedar Hill Road, Victoria V8T 3J5 Fax: 1.778.441.3373 Toll free: 1.866.758.2684 Website: www.businessexaminer.ca
PUBLISHER/EDITOR | Lise MacDonald SALES | Robert MacDonald - robert@businessexaminer.ca, John MacDonald - john@businessexaminer.ca WRITERS | Beth Hendry-Yim, Kristin Van Vloten, Val Lennox, Robert MacDonald
DEMANDING “A LITTLE BIT MORE” FROM TOP EARNERS WILL COST EVERYONE
MARK MACDONALD
W
hen I heard NDP Finance Minister Carole James state her government was going to have BC’s top earners pay “a little bit more” while announcing the provincial budget, I did a double take, and experienced a little acid reflux. Why, wasn’t it only recently that the federal Liberals were demanding that the “one-percenters” would have to pay “a little bit more” prior to the last national election? A couple of quick questions: Do they have the same speech writers? And do those who spout such lower-income vote pandering statements really not understand the ramifications of the income class warfare they’re propagating? Study after study shows that when governments tax upper-level income earners, it backfires financially. The Conference Board of Canada has released fact-based
studies demonstrating that when taxation levels climb above 50 per cent, that it becomes counter-productive and actually reduces tax revenue. And now, due to Canada’s predominant tax-and-spend policies, top earners will now pay 52 per cent of their income to various levels of government. If the ill-conceived federal tax overhaul of two years ago would have been implemented, professionals in Ontario would have faced tax bills of 72 per cent. Think about that for a second. For every dollar they would earn, they’d get to keep a paltry 28 cents. It’s immensely perplexing why socialists and non-business groups never stop to analyze what excessive taxation of the so-called rich accomplishes at the end of day. They never seem to grasp the connection and the obvious link between high levels of taxes and lower levels of government revenue. Maybe they don’t believe it. Perhaps they just don’t care. Or maybe, just maybe, they know they don’t need to listen to the business community or investors to get elected. That’s where we sit today in North America. Left-of-centre parties have learned that all they need to do to form government is cater to their support base, which includes the vast majority of the
not-working and those that depend upon, government assistance. Which is paid for by those that work and invest in businesses and employ people. Lobby groups and third party political entities have that figured out. After all, 40 per cent of Canadians DO NOT pay income tax. That is an astounding figure If they just get the people who are totally dependent on government, plus the vast majority of public sector union members whose jobs are tax reliant, to the polls, they’re in. Add to that the fact that public sector unions are intimately involved in elections through funding, advertising, and providing workers to campaigns, it’s an almost unbeatable combination. When I campaigned in a recent election, I was astounded by direct questions from voters in public forums, who asked straight up: “What will you give me?” Were they saying that if they were to be given $50 more a month in welfare or income assistance, they would vote for them? Isn’t that social bribery – and equally as despicable as any party that would promise contracts for their companies if elected? Imagine the outrage if a rightof-centre party, or any politician, promised government contracts to certain companies in return for
their support. The outcry would be deafening, Anyone that did that would never get elected, and would be labeled as corrupt vote-buyers for the rest of their lives. But isn’t that exactly what the left-of-centre parties are doing to their support base? Catchy phrases like “tax fairness” and “the rich don’t pay their fair share” resonate resoundingly with their supporters, and they are bought off with free this, and free that – without any of them realizing that nothing is free. Somebody, somewhere is paying. But if it’s not them, who cares? Well, we should all care. The “them”, the “rich”, and the “one percenters” are an identifiable group. They are called by other titles: Investors. Entrepreneurs. Business owners. These are the individuals who are already paying for most of everything we enjoy and use. Hospitals, roads, government services – all expenses paid for by businesses and investors who dare to put their own money on the line in hopes of earning a decent return. Excessively taxing them doesn’t get what naïve government officials hope – more revenue. It results in less because when governments eliminate hope of return, or incentive, those prospective risk takers keep their hands in their pockets and close their wallets.
Why would they invest where there is no, or little, hope of a decent return? They don’t, and with money being increasingly fluid in a global economy, they move it elsewhere. Investment and entrepreneurship doesn’t blossom where it’s not wanted. So, as provincial and federal governments continue to flag the “rich” as the bad people who don’t “pay their fair share”, it’s disingenuous at best, and a colossal failure to acknowledge that they’re already paying for everything. And left wing supporters decry tax cuts, saying it doesn’t help 40 per cent of the people. Which is correct, because they’re already contributing nothing to the public purse. What do they expect? Give them another handout as congratulations for paying no taxes? Nevertheless, it resonates with their supporters, and keeps getting them elected. Hopefully, one day, they will realize that punishing the “doers” by redistributing their wealth to those who “don’t” is costly for everyone, including their supporters. That’s because the revenue streams that dry up when investors stop investing or move to where they’re welcome are what makes the entire system run. Without them, there are no services or social programs.
TECK DECISION UNDERSCORES INVESTMENT CRISIS IN CANADA
FRASER INSTITUTE NIELS VELDHUIS AND ASHLEY STEDMAN
C
anada has massive investment potential. We have an abundance of natural resources, one of the most highly-educated populations in the world, and reside next to the world’s most successful economy. We’re also among the freest countries in the world, with freedom of religion, assembly, movement and
trade. We’re the kind of country that investment should be flocking to in droves. Instead, investment is fleeing our country. And the cancellation of Teck Resources’ $20-billion Frontier oil sands mine is unfortunately just the latest example of investment flight. On Sunday, just days before the federal government of Prime Minister Justin Trudeau was expected to approve or reject the project, Teck CEO Don Lindsay sent a letter to federal Environment and Climate Change Minister Jonathan Wilkinson saying the company was officially withdrawing its application. For investors, this is more evidence of how politicized the regulatory process for major projects in Canada has become. The blame lies at the feet of the federal government, which recently created the Impact Assessment Agency of Canada (IAAC) to review major energy projects. This has injected significant subjective criteria into project analyses, including
‘social’ impact, gender implications and potential climate effects. And it has further politicized the process by placing final decisions on approval or rejection in the hands of the federal cabinet. The government has also created mass uncertainty with unsustainable federal budget deficits, tax increases on high-skilled workers and entrepreneurs, and more burdensome regulations. As a result, the government has made Canada less competitive and less attractive for entrepreneurs and investors. Canada has plummeted in competitiveness report cards such as the World Bank’s Ease of Doing Business report, where we dropped from fourth place in 2007 to 23rd in 2020, or the latest World Economic Forum’s Global Competitiveness Report, which ranks Canada 14th compared to secondplace United States. Also worrying is the hard investment data. According to Statistics Canada, inflation-adjusted business investment in Canada has declined by 5.3
per cent over the past five years. If you remove residential structures and business investment in machinery and equipment from the equation, investment in intellectual property and non-residential structures has decreased by 13.2 per cent. This isn’t just an oil and gas story. There’s been a significant drop in investment across 10 of the 15 major sectors of the Canadian economy, including agriculture, mining, utilities, professional and technical services, manufacturing and retail. Clearly, investors – foreign and Canadian – are fleeing our country for more favourable investment climates. In total, $150 billion has left Canada from 2014 to 2018. And while final numbers for 2019 aren’t yet available, data from January to September indicates another $23 billion left in the first nine months of last year. This has left our investment per worker rate in Canada ($13,078 in 2018) well below the U.S. number ($22,270). It also puts us below the average in the 16 developed Organization for Economic Co-operation
and Development (OECD) countries where data is available ($17,026). Given that investment provides the resources for new equipment, innovation and ultimately sustainable and prosperous employment for Canadians, this is bad news for Canada’s economic prospects. Canada is viewed by Canadian and foreign investors as an inhospitable place to invest. When a country or jurisdiction fails to offer a competitive investment environment – or when the rules and policies are uncertain and unstable – business owners, entrepreneurs and investors look elsewhere. That’s the tragedy of Canada and the latest decision by Teck Resources. We’re a country with all the natural advantages one could dream of, yet we’re destroying our potential. Niels Veldhuis and Ashley Stedman are economists at the Fraser Institute. The op-ed was coauthored by Milagros Palacios, a Fraser Institute economist.
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