Juno News - Can tax reform save Canada’s economy？

00:00:00.000 I think the general sense here when we talk about Volkswagen, Stellantis, all of this

00:00:13.100 is that in general, corporate welfare is not a winning proposition.

00:00:17.880 Canadian taxpayers, Canadian workers really don't benefit from this.

00:00:21.840 It becomes a race to the bottom.

00:00:23.180 It's the big multinational companies that are the ones cashing the checks here.

00:00:26.660 But in this case, it really is adding insult to injury when it's not even Canadian jobs

00:00:31.420 that are ostensibly being created here.

00:00:34.040 Aaron Woodrick is the domestic policy guru over at the McDonnell-Laurier Institute and

00:00:38.740 joins us now.

00:00:40.000 Aaron, always good to talk to you.

00:00:41.440 I mean, this is like really a slap in the face, but I'm almost glad because it shows more

00:00:46.580 ostentatiously how bad corporate welfare is.

00:00:50.560 Yeah, look, for those who are tuning in who don't know my history on this, I mean, I've

00:00:54.080 been a longtime critic of corporate welfare in all sectors, in all places at all times.

00:00:58.800 I'm a big fan of free enterprise and business and the right to earn a living and make money

00:01:03.440 if you can.

00:01:03.920 But you should not be getting tax dollars if your business cannot support itself.

00:01:08.360 And that's especially true of these large multinationals.

00:01:10.920 Andrew, in this case in particular, what I had a bit of a chuckle about is that, you

00:01:15.220 know, these are the same people.

00:01:16.300 Whenever I make my usual objections, they say, well, you know, that's just that's just the

00:01:20.140 price we have to pay.

00:01:21.020 We have to pay to play if we want to get this plan.

00:01:23.540 We just have to outlay these billions of dollars.

00:01:25.660 That's just the way it is.

00:01:26.740 But if you say, oh, some of that outlay has to go to, you know, say the South Koreans want

00:01:31.260 to bring in some experts from Seoul because they're only ones who can do this.

00:01:34.580 Oh, no, no, we can't have that.

00:01:35.800 That's not a price we're willing to pay.

00:01:37.300 We're willing to throw billions of dollars at something that makes no economic sense.

00:01:40.740 But God forbid some of those workers come from outside of Canada.

00:01:43.520 So I thought that was a little bit rich, but it does expose the absurdity of the whole

00:01:47.400 thing.

00:01:48.360 And frankly, it's just another reason why governments should not get their fingers into

00:01:52.920 these business, right?

00:01:53.820 Like if a business brings in foreign workers and they're paying it on their dime, it's 0.98

00:01:57.740 kind of none of our business.

00:01:59.040 But once our money is engaged, once taxpayer money's invades, you've got the government

00:02:03.260 going in there saying, well, you have to put the plant here and you have to have this

00:02:06.360 many employees and you have to produce.

00:02:07.840 I mean, the government is basically running the company.

00:02:10.120 And then you start to wonder, I mean, for people who know, well, government runs itself.

00:02:13.880 Imagine how good a job they're going to do running a business like Stellantis. 0.92

00:02:17.500 Yeah, and I think Pierre Polyev made a point there, which is a valid one.

00:02:21.040 I mean, South Korea, I don't know much about their domestic politics, but I suspect they're

00:02:24.620 not giving companies large bailouts to bring in Canadian workers, nor should they.

00:02:30.000 So I don't really see the argument here on how Canada should be doing this.

00:02:34.120 I mean, TFWs are already a bit contentious.

00:02:36.840 I mean, the argument is that, well, they only exist because there are jobs that Canadians

00:02:40.720 just can't do or more specifically won't do.

00:02:43.360 In this particular case, when companies are given money that governments are turning around

00:02:47.340 and defending by saying it's going to create Canadian jobs and it's creating South Korean

00:02:52.140 jobs, it just doesn't really square there.

00:02:55.040 No, look, and when it comes to importing workers to do work in this country, they generally 0.57

00:02:58.740 fall into one of two buckets, right?

00:03:00.200 You have people who are very rare skills that are highly skilled that we just don't have

00:03:04.700 enough of those people on the high end.

00:03:06.660 And then also what we call the low skill end.

00:03:08.480 So you've got work that Canadians don't want to do. 0.92

00:03:10.600 It doesn't pay very well.

00:03:11.680 It's very hard.

00:03:12.460 So those are the two sort of high end and low end.

00:03:15.000 Now, on the high end, you know, if you're in a, you know, you're looking for nuclear

00:03:18.520 physicists, right?

00:03:19.480 There's just not that many.

00:03:20.800 There's not that much you can do, but that's not very many jobs.

00:03:23.100 On the low end, the challenge we have is people, employers say, well, we can't find

00:03:27.020 any workers, even if we raise our wages.

00:03:29.600 You know, in some cases that's true.

00:03:30.700 But my response there is, well, what kind of entitlements is the government offering that will

00:03:35.580 keep people out of these jobs?

00:03:36.620 I mean, the reality is if people, if we live in a country where the social safety net is

00:03:39.980 so comfortable that you can actually choose to work or not, and I'm not saying all people

00:03:44.620 do this.

00:03:45.080 Of course, some people can't work and have legitimate reasons not to work, but especially

00:03:48.280 in certain regions of this country, it's well established that are people that are prepared

00:03:52.460 to work less or work part of the year because the entitlement system is so generous.

00:03:56.760 So my argument is if you actually make that entitlement system a little bit less generous, create

00:04:01.240 some better incentives for people to work, you'll have more people going into those jobs.

00:04:04.780 You'll have less need for temporary foreign workers.

00:04:07.240 And this problem largely goes away.

00:04:09.200 Yeah.

00:04:09.300 And I hate to keep beating people over the head with the obvious point here, but there

00:04:13.220 is a difference between a company that says, look, we have this need.

00:04:17.720 We believe it can be best filled or only filled by foreign workers in this market and a company 0.99

00:04:22.780 that does that well.

00:04:23.580 The government is paying for it.

00:04:25.160 Well, exactly.

00:04:26.620 We're paying for the privilege.

00:04:27.740 And if a business wants to do that sort of thing, boy, they should be running as far

00:04:32.700 away as they can from any handout because obviously this objection, and politicians are right.

00:04:37.880 I mean, at least in this instance, you have governments now saying, well, we want to make

00:04:41.720 sure the taxpayer money is well spent on a subsidy in a different way.

00:04:45.260 But nonetheless, I mean, you can see how any politician worth their salt is going to see the alarm

00:04:50.380 ringing here saying this is not going to go over well with anybody if this money is actually

00:04:54.320 leaving the country.

00:04:55.820 Outside of this, I wanted to get you on the show anyway today.

00:04:58.820 You had a great piece in the Globe and Mail.

00:05:01.300 The key to saving Canada's economy is tax reform.

00:05:04.840 Now, I think it's safe to say in the last eight years, no one in government has come up

00:05:08.180 with a key to saving Canada's economy.

00:05:10.100 So I think as a Canadian, I say thank you for putting this up there.

00:05:14.200 But when you say tax reform, I mean, we often hear governments and political parties

00:05:18.360 talk about, oh, we can, you know, add this little tax credit here, this reduction.

00:05:22.560 In some cases, even more radical reforms like what Stephen Harper did in reducing the GST.

00:05:29.140 But when you talk about tax reform, you're talking about something a bit more radical

00:05:32.600 here.

00:05:33.060 Explain.

00:05:34.120 Yeah, I say, too, the title's a little bit generous.

00:05:37.400 I argue that tax reform's a key plank in, you know, boosting our economy.

00:05:41.120 It's not the only one.

00:05:41.900 That alone's not going to do it.

00:05:43.100 I would say, Andrew, generally the, you know, the debate over taxes is about higher or lower.

00:05:47.240 And I think that's an important debate.

00:05:48.440 I come down firmly on the lower side of that.

00:05:50.520 But that's a separate debate than a complex system.

00:05:53.920 We have an absurdly complicated tax system.

00:05:56.600 Most people who have to do their taxes know this.

00:05:58.700 Don't even try doing it without a professional help or without one of those softwares that

00:06:03.460 you purchase.

00:06:04.040 It's just, it's way too complicated.

00:06:06.260 There's a cost to that.

00:06:07.560 It distorts the system.

00:06:08.880 It's confusing.

00:06:09.980 It makes it hard for businesses to comply.

00:06:12.480 I think it's fair to say we should have a debate about how much money does the government

00:06:16.260 need, and then we got to look at the fairest, simplest, most neutral way to raise that money.

00:06:21.120 And that's part of the thing that often gets left out when we're debating higher or lower

00:06:24.560 taxes is which taxes are the ones that are the best to get this money, which ones are

00:06:29.100 going to, you know, create the least distortions and do the least damage to our economy.

00:06:33.960 One of the biggest problems with taxes, in my view, well, paying them, but one of the

00:06:38.180 other biggest problems, and this is true in Canada, it's especially true in the United

00:06:42.080 States, is that we have such a path dependency in our approach to taxes.

00:06:45.960 If you were to say, we're going to gather around a group of people and we're going to

00:06:49.960 create a new tax system from scratch that, you know, starting from zero, no assumptions

00:06:55.060 previously, I don't think anyone would land on what we have.

00:06:58.860 I don't think anyone would come up with a tax code that is just this long in the U.S.

00:07:02.680 even longer because it doesn't make sense and because it's so complex and convoluted.

00:07:07.760 Yet this is what we have.

00:07:09.520 And as a result, changes seem to be very limited to tweaks and like you say, higher or lower.

00:07:15.500 So would you, in the ideal world, if you were at that table, would you be changing

00:07:20.620 something fundamental in how much you rely on consumption, how much you rely on corporate,

00:07:25.960 how much you rely on sales and income?

00:07:28.080 Like, what would your approach be if you were to really blow this up and start from scratch?

00:07:33.060 Yeah, that's a great question.

00:07:33.980 And you're right.

00:07:34.420 It's a bit like barnacles on the hull of a ship, right?

00:07:36.420 They just keep clinging on and eventually you sort of, you drag the ship down with you.

00:07:40.060 There's an inertia element to that, right?

00:07:41.680 Their politicians have limited political capital.

00:07:43.960 They don't want to waste all their time sort of undoing or fixing the things their predecessors

00:07:48.040 don't.

00:07:48.260 They want to get on with their own.

00:07:49.080 So they just end up layering it on top of things.

00:07:51.700 Look, I think there's a good debate to be had about the role of consumption taxes.

00:07:56.360 You know, people don't like them because they can see them.

00:07:58.380 So they're kind of economically efficient, but they are very, very politically damaging.

00:08:02.620 We saw that with the GST in this country.

00:08:04.780 We've seen it with things like carbon taxes.

00:08:06.280 The other problem with consumption taxes is rarely are they applied consistently, see,

00:08:10.500 like you'll bring in something like a GST or a carbon tax and then you'll get all these

00:08:14.320 little carve outs, right?

00:08:15.260 Well, we won't tax poor people.

00:08:16.800 We won't tax pregnant mothers and we won't tax this product.

00:08:19.340 And so you kind of undermine the purpose of the consumption tax.

00:08:21.920 And just to interject there for a moment, and then you get these really convoluted debates

00:08:26.140 about what a food product is, you know, things like, well, this is a grocery product,

00:08:30.940 but this is a snack product.

00:08:32.180 So it's not even consistent within a category.

00:08:34.680 Yeah, so I would say, generally speaking, whether you're, you know, if you're going

00:08:38.880 to do consumption taxes, just do it blanket, don't have all these carve outs because otherwise

00:08:42.680 you're just undermining the additional value of that.

00:08:45.500 I mean, the other debate is over the, you know, taxing things like land and housing.

00:08:49.220 You know, some people are pushing for things like a home equity tax.

00:08:51.440 You can imagine how that's probably about as, you know, popular as a snowfall in July.

00:08:57.240 But I think another thing we need to really wrap our heads around, and this is another

00:09:01.420 political challenge is this idea of when we talk about taxing businesses, people love

00:09:05.560 taxing big corporations, right?

00:09:07.360 People forget that corporations are illegal fiction.

00:09:09.780 There is no thing called a corporation paying tax.

00:09:12.500 In reality, someone else is paying that tax.

00:09:14.660 It's the employees of the company.

00:09:16.200 It's the shareholders of the company.

00:09:17.560 It's the customers of the company.

00:09:19.500 So somebody else somewhere is paying that tax.

00:09:22.040 So, you know, it's very popular politically to say we should tax, you know, corporate tax,

00:09:26.060 raise it.

00:09:26.860 That doesn't hurt anybody.

00:09:28.080 Well, it actually does.

00:09:29.140 Somebody else is paying that tax.

00:09:30.780 And in a lot of cases, it's better to just tax people on their personal income tax than

00:09:35.580 it is through, you know, if you're very wealthy, say you want to get a very wealthy person to

00:09:39.060 pay more tax.

00:09:39.900 Don't tax the business they own more.

00:09:41.460 Just tax above a certain threshold their income higher.

00:09:45.060 That's the better way to go about that.

00:09:46.460 Coming back to that whole figure out how much you want to raise and then figure out the

00:09:50.160 least sort of distorting way to raise it.

00:09:52.620 And to put that into the context of our corporate welfare discussion.

00:09:55.380 I mean, I imagine if a government could say to a company, we're going to give you zero

00:10:00.400 dollars in corporate welfare, but we're going to charge you zero percent corporate tax because

00:10:06.140 we know that you're going to employ all these people who are going to pay corporate tax and

00:10:09.260 your executives are going to pay income tax or income tax, rather.

00:10:12.640 And, you know, that there's I don't know how much money that works out to because it depends

00:10:16.760 on the company.

00:10:17.280 But there's a very real chance that that would give them more than corporate welfare

00:10:22.440 does.

00:10:23.160 And it's an incentive that doesn't cost taxpayers money.

00:10:27.060 Right.

00:10:27.220 Well, look, incentives matter.

00:10:28.920 Right.

00:10:29.120 I've often gone to these debates about people say, well, you support tax cuts.

00:10:31.900 Isn't that the same as corporate welfare?

00:10:33.360 Right.

00:10:33.720 I mean, you're giving the company money.

00:10:35.040 And my response is pretty straightforward.

00:10:36.900 Right.

00:10:37.060 There's a big difference between if you run a business and you earn money, that's your money

00:10:41.040 and you get to keep more of it.

00:10:42.860 Right.

00:10:43.080 That's that's money you had to go out and earn in the marketplace.

00:10:45.940 That's different than the government coming along and saying, we're just going to sprinkle

00:10:48.880 this money on you.

00:10:49.620 You just get this money, whether you sell stuff or not.

00:10:51.620 And only to some companies.

00:10:53.260 Well, exactly.

00:10:54.340 Is across the board.

00:10:55.640 That's where the fairness thing comes in.

00:10:56.960 But I mean, just, you know, conceptually, they're very different for you to believe that

00:11:01.280 a tax cut is the same as corporate welfare requires you to believe it's actually the government's

00:11:05.040 money in the first place.

00:11:06.100 Right.

00:11:06.340 And they're just letting you keep some of it.

00:11:07.800 So I find that, you know, we can debate.

00:11:10.160 I'm not a big fan of boutique tax cuts either.

00:11:11.940 I think you should treat all businesses equally.

00:11:14.240 You shouldn't sort of single different ones out.

00:11:16.500 But letting people keep more of their own money is a very different thing than giving

00:11:19.600 them a bunch of money that was never theirs in the first place.

00:11:22.220 Well, and this is where we get to, I think, the biggest issue here.

00:11:25.180 And I realize that you're in a very good position on this because you work in policy.

00:11:29.360 But the politics and the policy of taxes and economics, I think, are oftentimes in direct

00:11:34.820 conflict.

00:11:35.460 And this is I mean, we can talk about the liberal government's financial mismanagement.

00:11:38.460 But I think the conservatives are particularly bad historically at wanting to embrace these

00:11:43.900 boutique tax cuts because it's very good politics.

00:11:46.120 If you can say to a single mom, you know, we're going to do this for you. 0.57

00:11:49.560 Or if you can say to a family with kids in sports, we're going to give you this money

00:11:52.880 for your kids to do sports.

00:11:54.360 But then what you've done is you've added more and more complexity, more carve outs and

00:11:58.980 less universality to the tax system.

00:12:01.700 Absolutely.

00:12:02.380 And you saw this argument during the conservative years under Stephen Harper.

00:12:05.280 They added a lot of boutique credits and who's going to argue with that?

00:12:07.740 Who's going to argue with the idea that, you know, giving families a tax credit to put

00:12:11.560 their kids in sports is a bad thing?

00:12:14.240 The problem is what I found ironic was that people at the time argued that, well, you

00:12:18.640 know, if we just cut if we just cut income taxes, the liberals would come along and reverse

00:12:22.060 that.

00:12:22.660 Whereas if we put these little things in the tax code for the reasons we talked about

00:12:25.380 earlier, they'll stay there.

00:12:26.380 What ended up happening, ironically, is just a true who comes into office.

00:12:29.740 One of the first and best things he did, in my view, is he actually he got rid of those

00:12:33.040 credits and he actually just got taxes.

00:12:34.520 So it's been a long time since since early 2016 when he did those great tax measures,

00:12:39.420 Andrew.

00:12:39.620 But I do remember back in the distant history that there was actually a couple of good tax

00:12:44.220 policies under Justin Trudeau.

00:12:45.900 But then your fiscal honeymoon ended when he still continued to ramp up spending for the

00:12:50.080 next eight years.

00:12:50.980 Yeah, it ended pretty fast.

00:12:51.880 Tax cut in.

00:12:52.920 Yeah.

00:12:53.180 Yeah.

00:12:53.480 Well, I hope that the Aaron Woodrick vision finds a home in someone who's in a position to

00:12:58.640 put it there where it needs to be on the books.

00:13:00.820 Aaron Woodrick from the MacDonald Laurier Institute.

00:13:03.060 Great piece in the Globe and Mail.

00:13:04.860 And thanks, as always, for coming on today.

00:13:06.900 Thanks, Lawton.

00:13:07.460 Thanks for listening to The Andrew Lawton Show.

00:13:10.020 Support the program by donating to True North at www.tnc.news.

00:13:15.500 The Andrew Lawton Show.

00:13:19.080 Thanks for listening.

00:13:27.100 We'll be right back.

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Juno News - December 05, 2023

Can tax reform save Canada’s economy？

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