Ont. budget needs business tax cuts to boost Canada's economic engine: Flaherty
TORONTO - With Ontario's budget already committed to ink and paper for Tuesday's release, federal Finance Minister Jim Flaherty delivered yet another instalment Monday in his campaign to push business tax cuts onto the provincial agenda as a way to boost Canada's faltering economic engine.
Dismissed as a partisan "stunt" by his provincial counterpart given the budget is already "locked in," Flaherty told a news conference that Ontario's Liberal government has plenty of time to heed his advice and change the budget bill before it's finally voted on - likely weeks from now.
Premier Dalton McGuinty has a "golden opportunity" to cut business taxes and kick-start the "economic engine" of the Canadian economy, said Flaherty, who has repeatedly warned that failure to do so could turn Ontario into a have-not province in need of equalization payments.
It was more of the same unsolicited - and flatly rejected - advice directed squarely at McGuinty and his finance minister that Flaherty has been delivering for weeks through public speeches across the country.
"We're in a time of slower growth," Flaherty, a former Ontario finance minister, said Monday in his Toronto office, just blocks from the provincial legislature.
"There is concern about the status of Ontario in our economic federation. We run the risk ... of Ontario becoming a have-not province over time - and not a long time."
Ontario is the "manufacturing heartland of Canada," but huge increases in spending by McGuinty, along with high corporate taxes, have dissuaded businesses from investing in the province, Flaherty said.
"Since I was treasurer and did the (Ontario) budget in 2001-2002, spending has gone up in the past six years by more than 50 per cent," he said.
"So when the premier says that he can't control spending or he can't reduce spending, I have a little trouble with that, quite frankly, given the skyrocketing spending over the past six years, together with high tax increases."
McGuinty and Ontario Finance Minister Dwight Duncan have both dismissed Flaherty's call for more tax cuts, saying that direct investments to help manufacturers with loans and grants is a better course of action - especially for struggling companies that aren't making any profits on which to pay taxes.
Tax cuts by Ontario's previous Conservative government, in which Flaherty held several cabinet posts, led to closed schools and hospitals and a lack of water inspectors, Duncan warned Monday.
"We have a very different opinion and a very different approach to responding to the challenges in the economy today," Duncan said.
"The last time we looked, Ontario rejected Mr. Flaherty's approach both in '03 and '07."
But Flaherty dismissed suggestions that Ontario cannot afford to cut taxes in the face of a slowing economy, and said the province's previous Conservative government proved that tax cuts not only create jobs, they also lead to higher provincial revenues.
"Sometimes I regret that Premier McGuinty does view government as a bank account - that is, if you reduce taxes, you therefore will have lower revenue," Flaherty said.
"Of course that's not so; we've seen that in recent Ontario history. When we reduced taxes, actually revenues grew in the province of Ontario."
To counter that argument, Duncan's office released an excerpt from Flaherty's federal budget stating that federal revenues from corporate taxes are expected to decline by 13.1 per cent in 2008-09 because of tax relief measures introduced by the Conservatives.
NDP Leader Howard Hampton said Monday that both levels of government are using the blame game to avoid taking real action to stem the loss of almost 200,000 good-paying manufacturing jobs in the province in the past four years.
"The problem is this: Mr. Flaherty and Mr. Harper are worried, Mr. McGuinty says he's worried, (but) none of them are doing anything to address the issues," Hampton said.
"Harper blames McGuinty while McGuinty blames Harper, and neither of them have done anything to help sustain manufacturing jobs, to address issues like long-term care and the tough spot that municipalities are in. Neither of them do anything to address issues like poverty."
Ontario Progressive Conservative Leader John Tory defended Flaherty's attacks against the province's Liberal government, saying the federal minister feels strongly that the province's taxes are out of line with those in other provinces.
"I think he's just very, very concerned about the state of the Ontario economy and how it affects the rest of Canada, and so are we," Tory said.
"Since we're largely on the same page in terms of what's needed to get jobs back here, to get investment going here, I was very happy that he was adding his voice to mine and that I was adding mine to his."
McGuinty recently sent an angry letter to Prime Minister Stephen Harper accusing the federal Conservative government of "undermining" Ontario after Flaherty told a Halifax audience that Ontario was "the last place" in Canada that businesses would want to invest in because of high corporate tax rates.
McGuinty said last week he still had not received any response from Harper.
Flaherty dismissed suggestions Monday that his public fight with McGuinty was aimed at giving the minority federal government someone to blame if the economy does head into a recession and the Conservatives have to face voters in a general election.
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