It’s a smart move to accelerate the corporate tax cut

When it comes to government initiatives to try and spur economic growth, lower taxes and increased spending are perhaps the two most common and obvious go-to ideas. So while it might be reasonable to fault Premier Jason Kenney’s economic recovery plan for lacking originality, it’s not as though these are unusual or radical approaches to responding to an economic downturn.

Reasonable people can disagree on just how impactful Kenney’s plan will be. The pandemic and the price of oil are the two biggest factors affecting our economy at the moment, and both of those factors are well outside of our control. We are limited, obviously, in the extent to which we can overcome or mitigate what’s happening globally.

At the same time, though, the scope of these economic challenges is no excuse for inaction. It’s understandable that governments would maximize whatever tools they have at their disposal to try and sustain the economy through this period and set it up for success coming out on the other side.

So it is bizarre and disheartening to see the pushback against the government’s move to accelerate the reduction in Alberta’s corporate tax rate. Perhaps it shouldn’t be surprising, given how politicized and misunderstood the issue of corporate taxation has become (although, unfortunately, the same could probably be said of consumption taxes or carbon taxes).

Reducing the provincial corporate tax rate to eight per cent two years ahead of schedule is not a panacea; but then again, that’s true of virtually anything the government could do at this point. However, it’s certainly a move that could help the province and this is no time for holding back on anything that might fit that bill.

This not only gives Alberta a significant competitive edge over other provinces, but also provides some much needed certainty and erases any doubt that any business might have had that Alberta would waffle on realizing its planned changes to corporate taxation. Certainty is a precious commodity these days.

To what extent this sort of stimulus can overcome significant economic headwinds remains to be seen. But the evidence is quite clear about the positive correlation between lower corporate taxation and increased investment and employment. It’s hard to see what benefits would have been realized from leaving the rate where it is or by increasing it.

If one is of the opinion that government is going to be in need of revenue (clearly not a deterrent at the moment when it comes to government spending), then there are other tools the government has at its disposal that are much more efficient in generating revenue and much less damaging to the economy. The idea that a lower corporate tax rate is somehow a giveaway to the “rich” is a ridiculous fallacy, and does a tremendous disservice to a rational debate about these issues.

The premier might be overly ambitious in thinking that we’re going to lure away banks and insurance companies from Bay Street, but Alberta — and Calgary specifically — has a lot of advantages now that don’t make the proposition seem that far-fetched.

The government does need to be careful of avoiding the trap of thinking it has done all it can do to make Alberta a competitive jurisdiction. Silicon Valley isn’t in California because of that state’s corporate tax rate.

We need to look at how cities like Austin, Texas, and Raleigh, North Carolina, have been able to compete with Silicon Valley and ensure that Alberta’s two largest cities are as attractive and as competitive as they can be. In fairness, the recovery plan does include some measures to support tech and innovation, but we may need to do a lot more if we want to be serious players in that arena.

In the meantime, though, enhancing our competitiveness where we can is a no-brainer. Accelerating the corporate tax reduction was smart policy.

Certainty is a precious commodity these days.