Flaherty vs Duncan

As someone who has been trying to raise some public awareness of corporate taxation, I obviously cannot agree with those who think that the federal Finance Minister should be raising this issue with his Ontario counterpart behind closed doors.

Flaherty's position, in a context of his own choosing and in writing, is available here.

This stuff isn't coming from Flaherty's own insight. He's getting it from Finance Dept memos and the key point to note here is that the Ontario government should be getting it from their own civil servants (although the fact that Ontario Finance Minister Dwight Duncan could be so bold as to state that Flaherty is "absolutely wrong" and declare that "[t]he old mantra that tax cuts create jobs doesn't [work]" does create some doubt about what, if anything, Finance Ontario is advising). It follows that it is not the Ontario government that needs to be educated but the voters of Ontario.

Now before anyone objects at how arrogant that sounds, let me be the first to admit my own ignorance of a key point. I've been critical of the federal Tories' 2% GST cut when they could have instead cut taxes on business and investment more. But my criticism there was relatively misplaced given that what the Ontario Liberals are doing is far more egregious. I now understand that Ontario's 8% PST is not, in fact, a value added tax. It applies to business inputs such that even the Toronto Star concedes that 40% of Ontario's retail sales tax revenue comes from business. It follows that Ontario's corporate rate alone does not tell anything like the whole story in terms of production costs and disincentives to investment. The Atlantic provinces (other than PEI) moved to a VAT in 1997 and a C.D. Howe study showed that in the following years annual investment in machinery and equipment there rose 12% above historic trend levels. Finance Canada says that "Harmonizing with the GST is the single most important action that these [harmonization resistant provinces] could take to improve their provincial and Canada’s overall tax competitiveness." Who's standing in the way of this? Dalton McGuinty and Dwight Duncan (although, in fairness, Ed "raise royalties" Stelmach isn't exactly welcoming business either).

Duncan hopes federal Finance Minister Jim Flaherty will aid Ontario by matching the province's $1.15 billion Next Generation Jobs Fund to keep and create manufacturing jobs here.
Despite the federal Conservatives' ideological aversion to what is often derided as "corporate welfare," Duncan says governments have to work with industry.
"My advice would be, "Pony up on this," [says Duncan].
- Toronto Star

This public "pony up" advice comes to you from a finance minister who elsewhere insists that a finance minister should evidently only advise another level of government in private.