Saskatchewan needs to keep up with shrinking business taxes
Moe must take bold action with cuts,
Our economy will recover because of crazy people who reopen their businesses in spite of unprecedented challenges; even crazier people who expand their businesses; and, craziest of all, people who start new businesses.
We desperately need these people in Saskatchewan. The provincial government has to support them by cutting business taxes and it needs to hurry because our neighbours have a head start.
Alberta cut its business tax to eight per cent on July 1.
“Our commitment to have the lowest taxes for job creators isn’t just some aspirational, out-there-in-the-future B.S. target,” said Alberta Premier Jason Kenney. “It’s real and it’s right now.”
The people who will create jobs and drive our recovery may be a bit crazy, but they’re not stupid and they’re good at math.
Alberta’s business tax is eight per cent. Saskatchewan’s is 12 per cent.
That’s the simple equation, but adding more factors tips it further in Alberta’s favour. Saskatchewan’s provincial sales tax is six per cent while Alberta has no PST at all. The Saskatchewan Ministry of Finance estimates that a family with an income of $75,000 in Regina pays $2,199 more in provincial taxes than they would in Calgary.
Saskatchewan Premier Scott Moe put an optimistic spin on the situation.
“When you look at the tax rates across Canada — the corporate tax rates — Saskatchewan compares very well,” Moe told the Leader-post. The numbers say something different.
The Atlantic provinces have the highest business tax rates ranging from 14 to 16 per cent. If Moe is trying to convince entrepreneurs to pick Davidson over Fredericton, he’s got a good shot. But the picture gets less rosy beyond the East Coast.
Ontario and Quebec both have lower business taxes than Saskatchewan.
British Columbia and Manitoba are even with Saskatchewan at 12 per cent. However, Manitoba’s small business tax rate is zero. For startups, that’s an important tie breaker.
Alberta’s business tax rate is now only twothirds of Saskatchewan’s.
Despite Moe’s cheery optimism, the overwhelming majority of Canadians live in places with lower business taxes than Saskatchewan. And our neighbours have significant advantages.
At this point, Saskatchewan’s finance pencil pushers are feeling panicky. The deficit is soaring and credit rating agencies are handing out downgrades like five-minute majors after a hockey brawl. What will happen if the province cuts taxes?
Saskatchewan has been through this before and we can do it again.
Alberta dramatically increased it’s competitiveness from 2001 to 2006 by cutting its business tax rate from 15.5 per cent to 10 per cent. Saskatchewan was left in the dust for much of that period, but started to turn the corner in 2006.
“These business tax cuts will help build a better future, by making our economy more competitive, and by encouraging business to invest more and create new jobs right here at home,” said New Democrat finance minister Andrew Thomson when he delivered the 2006 budget.
Thomson set out a plan to cut Saskatchewan’s punishing 17 per cent business tax by five points. When Brad Wall became premier, he stayed on that tax-cutting path. Three years later it was down to its current 12 per cent rate.
Saskatchewan boomed. Soaring commodity prices were part of that boom, but government policy also played a role. And it worked out for the province’s budget.
The provincial government collected $392 million in business taxes in 2005. In 2008, it collected $593.5 million. A couple of years later, it collected more than a billion, even with a lower tax rate.
That history illustrates a choice. What’s better: Collecting a lower rate from growing Saskatchewan businesses or nothing from businesses that move to Alberta?
Thomson and Wall showed boldness. Kenney is showing boldness. Moe needs to show boldness and cut Saskatchewan business taxes so crazy people can grow businesses and rebuild our economy.
Todd Mackay is prairie director of the Canadian Taxpayers Federation.