When the NDP cut corporate taxes …
… the economy boomed, and revenues soared
There’s a very good chance Andrew Thomson will be finance minister if the NDP wins the election. Thomson served as Saskatchewan’s finance minister just before the NDP lost power in that province. In a party short on governing expertise, Thomson stands tall. “Andrew has the experience and strong fiscal record that Ottawa needs,” said NDP Leader Tom Mulcair.
But there’s a problem with that narrative. Thomson’s “strong fiscal record” was built on slashing corporate tax rates. Mulcair, on the other hand, is running in the opposite direction and promising to raise federal corporate taxes from 15 per cent to as much as 17.5 per cent.
Mulcair should consider the track record of his star candidate. As Saskatchewan finance minister, Thomson’s 2006-07 budget announced that the provincial corporate tax rate would plummet from 17 per cent to 12 per cent.
“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,” Thomson said in his budget speech.
The corporate tax cuts did indeed build a better future for Saskatchewan. The Saskatchewan NDP was swept from power in 2007, but Brad Wall’s Saskatchewan Party continued to lower taxes. While Wall’s tax cuts and high commodity prices certainly deserve a great deal of credit for Saskatchewan’s boom, Thomson’s tax cuts also played a significant role. And the results were undeniable — Saskatchewan began to lead the country in economic growth and employment.
Here’s the remarkable thing: Cutting taxes didn’t just help businesses and families, it also filled the province’s coffers. Saskatchewan collected $392 million in corporate taxes in 2005-06 before the rates began to fall. By the middle of 2008-09, Saskatchewan’s corporate tax rate was all the way down to 12 per cent, but the government’s total take was higher with $593.5 million in corporate taxes. Over the next two years, Saskatchewan’s corporate tax revenue soared to $880.2 million and then $1.15 billion.
Saskatchewan’s GDP grew by about 60 per cent from 2006 to 2011. The province’s corporate tax take soared by nearly 168 per cent during that same period (adjusted for inflation). As a share of GDP, Saskatchewan’s corporate tax revenues went from 0.98 per cent to 1.63 per cent.
Thomson did indeed make corporations pay their “fair share” — he did it by cutting their tax rate. The corporate tax cuts were not the only factor in Saskatchewan’s boom, but they are clearly the strongest point on Thomson’s resume as the province’s finance minister.
Signatories of the Leap Manifesto are no doubt worried about Thomson. Will an NDP government really make corporations pay their “fair share” or will it follow a Harper-lite course, as the Liberals insinuate? Mulcair further stokes those fears when he cites former Saskatchewan premier Roy Romanow’s record — a record that includes the closure of 52 rural hospitals as a cost-cutting measure.
For his part, Thomson his working hard to quiet those internal concerns when questioned about his tax-cutting record.
“We’re in a different situation in the country right now,” Thomson said. “I think it is certainly fair to ask larger businesses to pay their fair share.”
Back in Thomson’s homeland of Saskatchewan, that comment is prompting furrowed brows. People change when they move away, but it’s concerning to see Thomson repudiate a record of which he should be proud. Hopefully Thomson will come home for Thanksgiving and see the successful Saskatchewan he and his tax cuts helped build.