National Post (National Edition)

IT’S LIKE A COACH SAYING HIS STRATEGY IS TO WIN THE STANLEY CUP. BUT HOW?

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The centrepiec­e of O’Leary’s economic plan is three per cent growth. That’s great. We all — ecomaniacs aside — want three per cent growth. But it’s like a hockey coach saying the centrepiec­e of his strategy is to win the Stanley Cup. Well, yes, that’s the goal. We all agree. But how exactly do you go about achieving it?

One step for O’Leary is to lower the federal corporate tax from 15 to 10 per cent. That’s good. But will there still be a separate rate for small business? O’Leary says Canadians are tired of hack politician­s who keep telling people what they want to hear. The Department of Finance estimates the small-business rate costs $3.3 billion a year. With the overall rate at a mere 10 per cent, would we really need a preferenti­al rate for small business?

O’Leary says some Ontarians pay 54 per cent of their income in personal taxes. What he presumably means is that Ontario’s top marginal rate, federal and provincial combined, is almost 54 per cent. By definition, you don’t pay the top rate on all your income. You only do that if your income is infinite. If it is, you don’t mind paying 54 per cent of it in taxes: The 46 per cent of infinity you get to keep is still infinity.

His heart’s in the right place though, even if his math isn’t. He would lower federal rates until the federal-provincial total was less than 50 per cent. But unlike other Conservati­ve leadership candidates, he says, he would prevent the provinces from moving in to the vacated tax room. It’s good that although he spends a lot of time outside the country he knows Canada is a federal system. It’s not so good that he doesn’t understand the provinces are in fact free to run an income tax system how they like. Nothing in the Constituti­on or other law prevents them from raising income tax rates if they so wish.

Though he therefore can’t forbid them from moving in with higher taxes he intends to use equalizati­on payments and other federal transfers as leverage. Raise taxes and you get less of those, he says. That might be hard to do for equalizati­on, a general outline of which is enshrined in the Constituti­on. (So sue me, Donald Trump would say. Maybe O’Leary, too.)

Making other transfers conditiona­l on provincial tax rates might not be unconstitu­tional but would clearly violate their purpose, which is to get roughly equal per capita grants to the provinces for various social purposes, like welfare, education, and health care.

“Giving up tax points just to get along is the wrong approach,” O’Leary says. Well, sure. But formal surrender of tax points hasn’t been done in a long time. If the feds decide to lower their rates, nothing prevents the provinces from raising theirs.

That doesn’t mean the feds have no leverage on provincial taxes. They could use the spending power to encourage good provincial behaviour. But that would involve new federal grants in exchange for provincial tax cuts, which wouldn’t be so good for the black hole’s red line.

O’Leary says “I do not tolerate mediocrity.” That’s hard to tell from his economic plan.

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