UCP CUTS CORPORATE TAXES

Job-creation claims doubted

As Treasury Board and Finance Minister Travis Toews introduced a bill Tuesday to slash tax Alberta’s corporate taxes, he repeated a campaign pledge that the cuts should create at least 55,000 jobs in Alberta.

But some economists are skeptical a corporate tax dip would wield that kind of influence.

Moshe Lander, a senior lecturer in economics at Concordia University in Montreal, said Tuesday there are numerous economic factors influencing jobs in Alberta — tensions in the Middle East and international tariffs come to mind this week.

Lower corporate taxes lead to shareholders paying more income tax, which is administratively efficient, said Lander, who also teaches in Alberta. But administrative efficiency doesn’t make for a “sexy” platform promise, he said.

“It’s a mistake to say that it’s a job-creating decision,” Lander said.

“The ups and downs of the business cycle are going to dictate a lot of that government revenue, more so than (Toews’) tax cuts.”

If Alberta’s economy has bottomed out, job numbers would likely climb regardless of provincial tax policy, he said.

Job creation depends on the labour market and overall economy, said Kevin Milligan, economics professor the University of British Columbia’s Vancouver School of Economics.

“I think these claims of jobs created — I think it’s a good modelling exercise to do, but you want to take it with a grain of salt,” he said.

As promised, Toews on Tuesday tabled Bill 3, dubbed the “Job Creation Tax Cut.” If passed by the legislature, it would reduce Alberta’s corporate tax rate to 11 per cent from 12 per cent come July 1, then down to 10 per cent on Jan. 1, 2020. Corporate tax would be nine per cent come Jan. 1, 2021, and eight per cent on Jan. 1, 2022.

The government may accelerate that timeline, depending on the economy, Toews said Tuesday.

“I’m excited to watch Alberta’s economy respond to this initiative,” he said.

At 11 per cent, Alberta would have the lowest corporate tax rate of the 13 provinces and territories. Ontario’s is currently 11.5 per cent and Quebec’s is 11.6 per cent.

When the rate is eight per cent, Toews said it will be lower than taxes are today in 44 of 50 U.S. states, bolstering Alberta’s international competitiveness.

“With the amount of investment that fled this province, we really believed we needed a bold move to attract investment again back into this province.”

Although he quoted an analysis by University of Calgary economist Jack Mintz saying the tax cut will lead to the creation of at least 55,000 full-time jobs in the private sector, Toews could not provide a timeline in which those jobs would be created.

Alberta’s unemployment rate was 6.7 per cent in April. It last peaked at 9.1 per cent in November 2016.

The finance minister did not know when the tax cut would pay for itself. An analysis by Stokes Economics predicts the cut will result in $1 billion less net revenue for the province by 2022-23.

Former NDP finance minister Joe Ceci said Tuesday that hit to revenue is bound to mean cuts to public services like schools and hospitals.

Now opposition municipal affairs critic, Ceci said a corporate tax cut won’t diversify Alberta’s economy and is “based on wishful thinking.”

The Alberta Union of Provincial Employees called the cuts “corporate welfare” in a Tuesday news release.

“This bill is a free ticket-to-ride that lets profitable corporations contribute less to the province that has enabled them to make enormous profits,” president Guy Smith said in the release.

Economics professor Milligan said there are benefits to lower corporate taxes — they increase investment in the long term and should lead to higher wages.

He’s glad to see the government roll the cuts out gradually, which could act as an incentive to invest, rather than a reward for past behaviour.

However, the cuts come with a risk of running larger deficits to maintain public services, he said.

Milligan said Alberta’s ability to expand its pipeline capacity and the price of oil are bigger factors in the province’s economic fate.

This bill is a free ticket-to-ride that lets profitable corporations contribute less to the province that has enabled them to make enormous profits.