Trudeau’s challenges: Trump, taxes and energy
Canada’s tax and energy advantages are coming to a sudden end, and we should expect businesses will move more investment to the U.S.
When Justin Trudeau shuffled his federal cabinet last week, it signalled he’s taking the next United States president seriously. Finding the right mix of people to work with White House officials is important. But government policies also matter. Our prime minister will need to do more to keep
Canada competitive and protect Canadianadian jobs.
Donald Trump is ready to upend U.S. policy on everything from trade to defence treaties to immiigration. But the president-elect’s domestic propossals on taxes and energy are Canada’s greater challennges.
The Trump administration intends to move quickly to cut the business tax rate from 35 to 15 5 per cent. Add the four per cent average corporate taxax applied by state and local governments and the neww U.S. tax rate could soon effectively be a cool 19 per cent,nt, about eight points lower than Canada’s 27 per cent averageage when federal and provincial rates are combined.
Our country’s tax advantage is coming to a sudden end. As a result, we should expect businesses will l invest more in the United States and less in Canada, where higher costs exist.
This brings us to energy. Trudeau wants all provinces to put a price on carbon, directly with a carbon tax or indirectly with cap-and-trade regulaations. If the provinces don’t, Trudeau will impose ea a carbon tax. The impact of either strategy is the same: me: more expensive for Canadians to get around, heat their homes and keep the lights on. Pricing carbon will ll increase the cost of almost everything, including food.
A typical Canadian family will likely pay more than $1,200 a year in new energy taxes by 2022 - and twicewice that if Ottawa decides to apply its new tax aggressively.
Carbon pricing isn’t the only way Trudeau’s policies will raise electricity rates. His order to provincial governmentsernments to shutter coal-fired stations by 2030 will eliminate a source of cheap and reliable power from Canada’s energy mix. Here’s what that means for one small province: New Brunswickunswick has a single coal-burning power plant and NB Power ower officials have said closing it would increase provinvincial electricity rates by a staggering 38 per cent.
Meanwhile, U.S. ratepayers face no carbon tax. ax.
And American energy costs will likely fall as Trump mp repeals President Barack Obama’s executive ordersers restricting the extraction and use of fossil fuels. What’s Ottawa’s response to all this?
Trudeau says Canada could win if the incoming president rejects plans to make U.S. energy more expensive. He told a Calgary business audience last month, “We know that this is the way the world is going and if the United States wants to take a step back from it, quite frankly, I think we should look at that as an extraordinary opportunity for Canada and for Canadians Canadians.”
It’s a brav brave face - but does it make sense?
Trump Trump’s energy policies twinned with deep tax cuts will reduce Canada’sC competitiveness.
Ca Canadian policy-makers, and the prime minister, don’t h have to like this change and may privately curse it. But ou our federal and provincial governments can’t pretend Trum Trump’s policy agenda won’t have any impact on the econo economy when Canadian jobs are at risk.
C Canada’s energy sector is already concerned that gover government policy will soon put our country at a competitiv petitive disadvantage, and that investment and jobs will move to the U.S.
In O Ontario, some businesses are already eyeing nearby U.S. statesst with more affordable energy prices. Ontario electricity pricesp have skyrocketed thanks to costly provincial regulations. CarbonC pricing means bills for natural gas, gasoline and dieseldiese are going up next. The Coalition of Concerned Manufa Manufacturers of Ontario, a group of small- and mediumsized businesses,b has raised the alarm and is urging the gove government to reverse course or risk job losses. Canada’s long-term growth depends on its businesses remaining competitive. Affordable energy is part of the mix, along with reasonable tax rates. Likewise, the prosperity of Canadian famil ilies is impacted by the price of home heating fuels, pow power and gas. Dramatic price increases leave households poo poorer, while inexpensive energy would mean households have more income for other things.
With Canadian energy prices set to increase relative to U.S. prices prices, there will soon be an additional cost to Canada’s carbon pol policy. That price is less investment and lost jobs. Lower U.S. taxe taxes will only compound the problem.
Canadi Canadian workers and businesses can’t afford such a shift. The TrudeauTru government’s next move should be to overhaul its carb carbon pricing plan to account for the policy shift south of the borde border. Canada needs a strategy that doesn’t penalize busine businesses and ordinary Canadians. -TROYMEDIA
John Williamson is president of Canadians for Aff Affordable Energy.