Juno News - December 05, 2023Can tax reform save Canada’s economy？
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Summary
In the wake of the Volkswagen plant in St. Louis, Canada is getting billions of dollars from the federal government to bring in foreign workers to fill the gap left by the plant. But is this good or bad corporate welfare? And what does it really mean for Canadian workers? We talk to Aaron Woodrick, the domestic policy guru at the Macdonald-Laurier Institute, to find out.
Transcript
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I think the general sense here when we talk about Volkswagen, Stellantis, all of this
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is that in general, corporate welfare is not a winning proposition.
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Canadian taxpayers, Canadian workers really don't benefit from this.
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It's the big multinational companies that are the ones cashing the checks here.
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But in this case, it really is adding insult to injury when it's not even Canadian jobs
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Aaron Woodrick is the domestic policy guru over at the McDonnell-Laurier Institute and
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I mean, this is like really a slap in the face, but I'm almost glad because it shows more
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Yeah, look, for those who are tuning in who don't know my history on this, I mean, I've
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been a longtime critic of corporate welfare in all sectors, in all places at all times.
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I'm a big fan of free enterprise and business and the right to earn a living and make money
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But you should not be getting tax dollars if your business cannot support itself.
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And that's especially true of these large multinationals.
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Andrew, in this case in particular, what I had a bit of a chuckle about is that, you
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Whenever I make my usual objections, they say, well, you know, that's just that's just the
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We have to pay to play if we want to get this plan.
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We just have to outlay these billions of dollars.
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But if you say, oh, some of that outlay has to go to, you know, say the South Koreans want
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to bring in some experts from Seoul because they're only ones who can do this.
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We're willing to throw billions of dollars at something that makes no economic sense.
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But God forbid some of those workers come from outside of Canada.
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So I thought that was a little bit rich, but it does expose the absurdity of the whole
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And frankly, it's just another reason why governments should not get their fingers into
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Like if a business brings in foreign workers and they're paying it on their dime, it's
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But once our money is engaged, once taxpayer money's invades, you've got the government
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going in there saying, well, you have to put the plant here and you have to have this
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I mean, the government is basically running the company.
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And then you start to wonder, I mean, for people who know, well, government runs itself.
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Imagine how good a job they're going to do running a business like Stellantis.
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Yeah, and I think Pierre Polyev made a point there, which is a valid one.
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I mean, South Korea, I don't know much about their domestic politics, but I suspect they're
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not giving companies large bailouts to bring in Canadian workers, nor should they.
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So I don't really see the argument here on how Canada should be doing this.
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I mean, the argument is that, well, they only exist because there are jobs that Canadians
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In this particular case, when companies are given money that governments are turning around
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and defending by saying it's going to create Canadian jobs and it's creating South Korean
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No, look, and when it comes to importing workers to do work in this country, they generally
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You have people who are very rare skills that are highly skilled that we just don't have
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So you've got work that Canadians don't want to do.
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So those are the two sort of high end and low end.
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Now, on the high end, you know, if you're in a, you know, you're looking for nuclear
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There's not that much you can do, but that's not very many jobs.
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On the low end, the challenge we have is people, employers say, well, we can't find
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But my response there is, well, what kind of entitlements is the government offering that will
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I mean, the reality is if people, if we live in a country where the social safety net is
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so comfortable that you can actually choose to work or not, and I'm not saying all people
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Of course, some people can't work and have legitimate reasons not to work, but especially
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in certain regions of this country, it's well established that are people that are prepared
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to work less or work part of the year because the entitlement system is so generous.
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So my argument is if you actually make that entitlement system a little bit less generous, create
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some better incentives for people to work, you'll have more people going into those jobs.
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You'll have less need for temporary foreign workers.
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And I hate to keep beating people over the head with the obvious point here, but there
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is a difference between a company that says, look, we have this need.
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We believe it can be best filled or only filled by foreign workers in this market and a company
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And if a business wants to do that sort of thing, boy, they should be running as far
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away as they can from any handout because obviously this objection, and politicians are right.
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I mean, at least in this instance, you have governments now saying, well, we want to make
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sure the taxpayer money is well spent on a subsidy in a different way.
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But nonetheless, I mean, you can see how any politician worth their salt is going to see the alarm
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ringing here saying this is not going to go over well with anybody if this money is actually
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Outside of this, I wanted to get you on the show anyway today.
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The key to saving Canada's economy is tax reform.
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Now, I think it's safe to say in the last eight years, no one in government has come up
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So I think as a Canadian, I say thank you for putting this up there.
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But when you say tax reform, I mean, we often hear governments and political parties
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talk about, oh, we can, you know, add this little tax credit here, this reduction.
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In some cases, even more radical reforms like what Stephen Harper did in reducing the GST.
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But when you talk about tax reform, you're talking about something a bit more radical
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Yeah, I say, too, the title's a little bit generous.
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I argue that tax reform's a key plank in, you know, boosting our economy.
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I would say, Andrew, generally the, you know, the debate over taxes is about higher or lower.
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But that's a separate debate than a complex system.
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Most people who have to do their taxes know this.
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Don't even try doing it without a professional help or without one of those softwares that
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I think it's fair to say we should have a debate about how much money does the government
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need, and then we got to look at the fairest, simplest, most neutral way to raise that money.
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And that's part of the thing that often gets left out when we're debating higher or lower
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taxes is which taxes are the ones that are the best to get this money, which ones are
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going to, you know, create the least distortions and do the least damage to our economy.
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One of the biggest problems with taxes, in my view, well, paying them, but one of the
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other biggest problems, and this is true in Canada, it's especially true in the United
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States, is that we have such a path dependency in our approach to taxes.
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If you were to say, we're going to gather around a group of people and we're going to
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create a new tax system from scratch that, you know, starting from zero, no assumptions
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previously, I don't think anyone would land on what we have.
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I don't think anyone would come up with a tax code that is just this long in the U.S.
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even longer because it doesn't make sense and because it's so complex and convoluted.
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And as a result, changes seem to be very limited to tweaks and like you say, higher or lower.
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So would you, in the ideal world, if you were at that table, would you be changing
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something fundamental in how much you rely on consumption, how much you rely on corporate,
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Like, what would your approach be if you were to really blow this up and start from scratch?
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It's a bit like barnacles on the hull of a ship, right?
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They just keep clinging on and eventually you sort of, you drag the ship down with you.
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Their politicians have limited political capital.
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They don't want to waste all their time sort of undoing or fixing the things their predecessors
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So they just end up layering it on top of things.
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Look, I think there's a good debate to be had about the role of consumption taxes.
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You know, people don't like them because they can see them.
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So they're kind of economically efficient, but they are very, very politically damaging.
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The other problem with consumption taxes is rarely are they applied consistently, see,
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like you'll bring in something like a GST or a carbon tax and then you'll get all these
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We won't tax pregnant mothers and we won't tax this product.
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And so you kind of undermine the purpose of the consumption tax.
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And just to interject there for a moment, and then you get these really convoluted debates
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about what a food product is, you know, things like, well, this is a grocery product,
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Yeah, so I would say, generally speaking, whether you're, you know, if you're going
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to do consumption taxes, just do it blanket, don't have all these carve outs because otherwise
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you're just undermining the additional value of that.
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I mean, the other debate is over the, you know, taxing things like land and housing.
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You know, some people are pushing for things like a home equity tax.
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You can imagine how that's probably about as, you know, popular as a snowfall in July.
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But I think another thing we need to really wrap our heads around, and this is another
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political challenge is this idea of when we talk about taxing businesses, people love
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People forget that corporations are illegal fiction.
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There is no thing called a corporation paying tax.
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So, you know, it's very popular politically to say we should tax, you know, corporate tax,
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And in a lot of cases, it's better to just tax people on their personal income tax than
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it is through, you know, if you're very wealthy, say you want to get a very wealthy person to
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Just tax above a certain threshold their income higher.
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Coming back to that whole figure out how much you want to raise and then figure out the
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And to put that into the context of our corporate welfare discussion.
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I mean, I imagine if a government could say to a company, we're going to give you zero
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dollars in corporate welfare, but we're going to charge you zero percent corporate tax because
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we know that you're going to employ all these people who are going to pay corporate tax and
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your executives are going to pay income tax or income tax, rather.
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And, you know, that there's I don't know how much money that works out to because it depends
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But there's a very real chance that that would give them more than corporate welfare
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And it's an incentive that doesn't cost taxpayers money.
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I've often gone to these debates about people say, well, you support tax cuts.
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There's a big difference between if you run a business and you earn money, that's your money
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That's that's money you had to go out and earn in the marketplace.
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That's different than the government coming along and saying, we're just going to sprinkle
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You just get this money, whether you sell stuff or not.
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But I mean, just, you know, conceptually, they're very different for you to believe that
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a tax cut is the same as corporate welfare requires you to believe it's actually the government's
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I think you should treat all businesses equally.
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You shouldn't sort of single different ones out.
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But letting people keep more of their own money is a very different thing than giving
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them a bunch of money that was never theirs in the first place.
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Well, and this is where we get to, I think, the biggest issue here.
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And I realize that you're in a very good position on this because you work in policy.
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But the politics and the policy of taxes and economics, I think, are oftentimes in direct
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And this is I mean, we can talk about the liberal government's financial mismanagement.
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But I think the conservatives are particularly bad historically at wanting to embrace these
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boutique tax cuts because it's very good politics.
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If you can say to a single mom, you know, we're going to do this for you.
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Or if you can say to a family with kids in sports, we're going to give you this money
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But then what you've done is you've added more and more complexity, more carve outs and
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And you saw this argument during the conservative years under Stephen Harper.
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They added a lot of boutique credits and who's going to argue with that?
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Who's going to argue with the idea that, you know, giving families a tax credit to put
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The problem is what I found ironic was that people at the time argued that, well, you
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know, if we just cut if we just cut income taxes, the liberals would come along and reverse
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Whereas if we put these little things in the tax code for the reasons we talked about
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What ended up happening, ironically, is just a true who comes into office.
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One of the first and best things he did, in my view, is he actually he got rid of those
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So it's been a long time since since early 2016 when he did those great tax measures,
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But I do remember back in the distant history that there was actually a couple of good tax
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But then your fiscal honeymoon ended when he still continued to ramp up spending for the
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Well, I hope that the Aaron Woodrick vision finds a home in someone who's in a position to
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put it there where it needs to be on the books.
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Aaron Woodrick from the MacDonald Laurier Institute.
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Thanks for listening to The Andrew Lawton Show.
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Support the program by donating to True North at www.tnc.news.