Corporate tax cut isn’t creating jobs

The first and really only thing anyone needs to understand about job creation is that it doesn’t exist — at least not in the way we’re being promised.

The Job Creation Tax Cut — a 33% reduction in corporate taxation over four years — has been sold to Albertans as a means to more employment through both the expansion of existing investment and the attraction of new.

So far, following a July 1 drop of one percentage point to make it 11%, that isn’t really happening. For oil and gas companies, the first tax break went straight to shareholders, something Energy Minister Sonya Savage acknowledged in a Calgary Herald piece back in August.

“Some of them are using it to buy back shares and to reposition (and) balance their books … We would like to see that money being invested into jobs. We’d like to see it being invested into projects; we’d like it to stay here in Alberta to create jobs.

“So yeah, we are a little disappointed in seeing what decisions have been made on where that investment, where that money goes. But that’s decisions of corporate boards.”

Her comments suggest she and her colleagues were surprised to see Alberta’s top oil executives behave in such a way. That same Calgary Herald piece said Suncor Energy reported in its net earnings a one-time deferred income tax recovery of $1.1 billion, while Imperial Oil padded its books by an extra $662 million.

Two companies, $1.7 billion in new profit for them and $1.7 billion in lost revenue to Albertans. Most importantly, zero jobs “created.” In fact, the industry lost 2,600 jobs last month and, just for example, Cenovus reported on Oct. 2 a plan to lower its capital-spending forecast from earlier in the year in an effort to give more money back to shareholders.

So why are they all doing this?

We could debate the mindset of corporate CEOs all day but the answer is simpler than analyzing the constructs of greed. They took their first 1% tax break and gifted it to themselves and shareholders not because they’re mean or don’t necessarily care about employing Albertans. They did it because there was no reasonable business case to spend it any other way.

Changing their taxation level did absolutely nothing to the supply and demand of Alberta’s oil. Pipeline debates, production caps, ripped-up rail contracts, painfully low market prices and more have the supply control cornered, while demand for Alberta’s product isn’t exactly on the rise either, despite bumper stickers that read, “Let it idle, Support the ’patch.”

As I’ve already written in previous columns, jobs in the private sector exist for the purpose of achieving profit, and since labour is the most controllable cost of operation, the tightest of grips are wrapped around worker numbers, hours and wages. No oil company is going to invest in new capital or hire new people just because of new money. They need the demand and then the means to supply that demand before they will expand.

So this must all be Justin Trudeau’s fault for not building the pipelines, right? If we had the pipelines, we’d have the jobs. Let’s for argument sake suggest that’s true — it’s not like that exact notion hasn’t dominated the media for years on end.

If pipeline capacity is the thing holding us back, then why bother with a corporate tax cut? Oil executives have been saying, “We need a pipeline to grow our industry,” not, “We need a pipeline AND lower taxes to grow our industry.”

The tax cut is irrelevant. It isn’t creating jobs when the oil isn’t needed, and it won’t cost jobs if the oil flow increases. Our tax rate was at 10% when the oil bust hit and it wasn’t stopping thousands of jobs from disappearing a full year before Rachel Notley hiked it to 12. It was at 15% under Ralph Klein and that didn’t stop the industry from booming beyond anything anyone could’ve imagined.

Savage told the

Calgary Herald that

Albertans need to be patient, and that the tax cut will work its magic over time. If the market happens to demand more employment along the way, surely the

Job Creation Tax

Cut will be cited for all its glory.

Meanwhile, a handful more Albertans will go to work and everyone else will enjoy the luxurious benefits of shrinking revenue.

Scott Schmidt is the layout editor at the Medicine Hat News. You can contact him by email at sschmidt@medicinehatnews.com

“No oil company is going to invest in new capital or hire new people just because of new money. They need the demand and then the means to supply that demand before they will expand.”