NDP seeks to fund spending plans with corporate tax hike

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The Globe and Mail is hosting a debate on the economy among the leaders of the three main political parties on Thursday at 8 p.m. (ET). Click here for more details.

The New Democratic Party unveiled its economic plan Wednesday, relying on corporate tax increases to pay for a suite of spending programs and promising four years of budgetary surpluses if it forms government next month.

Critics, however, say the party overestimates how much new revenue the corporate tax hike would actually bring in, given the potential for companies to shift profit elsewhere. There were also questions as to why the NDP is relying heavily on April's budget numbers, given that economists have since lowered their forecasts for economic growth and federal revenue.

With the release of the NDP numbers, all three major parties have now outlined in broad strokes how they would govern if elected – and their visions are starkly different.

The economic plans will be put to the test Thursday evening as the three major party leaders take part in a debate in Calgary on the economy hosted by The Globe and Mail that can be seen online or on the Cable Public Affairs Channel. The NDP plan to hike corporate taxes could be a flashpoint in the debate as both the Conservatives and Liberals oppose it, saying it would be bad for the economy.

The Conservatives are campaigning on their April budget, which cut taxes and promised balanced budgets and more infrastructure spending over the coming years. The NDP say they would balance the books as well, but would fund new programs with roughly $7-billion a year in tax increases, including raising the corporate tax rate to 17 per cent from 15 per cent.

The Liberals are planning to run deficits for three years to fund major investments in infrastructure, but have not released specific spending and revenue figures for each year.

The New Democrats are locked in a tight three-way battle with both the Conservatives and the Liberals as the election campaign enters its final month. With the economy at the top of the list of issues on the minds of voters, NDP Leader Thomas Mulcair hopes to persuade Canadians that he is a prudent fiscal manager, and someone who can chart a course to prosperity without driving up debt.

The seven-page document released Wednesday in Ottawa includes a chart titled "A balanced plan," but total new spending and total new revenue are not in balance. The chart lists seven sources of new revenue, which add up to $7.2-billion in 2016-17 and increase to $7.5-billion in 2019-20. The chart also lists eight categories of new spending, which add up to $5.8-billion in the first year and rise to $11.3-billion in the fourth year.

In the document, the NDP says it will rely heavily on a two-point increase to the corporate tax rate on Jan. 1 as a key source of revenue to pay for billions in new spending on health transfers, daycare spaces and new infrastructure. The party says it can do all of this while planning for surpluses of at least $3-billion a year in each year of a four-year mandate.

The NDP says the document is not the party's full platform, as it still plans to make more detailed announcements throughout the campaign.

Critics questioned the New Democrats' reliance on the April budget numbers to project surpluses given that forecasts for economic growth have since been lowered substantially, which will lead to less federal revenue.

On taxation, an NDP government led by Mr. Mulcair says it expects $3.7-billion a year from the corporate tax increase, making it the single biggest source of new revenue in the party's costing plan.

"The NDP's fiscal plan that we have announced today is balanced and it is progressive," Andrew Thomson, a former Saskatchewan finance minister who is running for the NDP against Conservative candidate Joe Oliver in the Toronto riding of Eglinton-Lawrence, told reporters at an afternoon news conference. Mr. Oliver is the Finance Minister in the Tory government.

But questions quickly emerged Wednesday as to whether the corporate-tax estimate may prove optimistic, given that corporations could shift profit to countries with lower rates.

The actual costing provided by the New Democrats was thin, spanning just two pages of the seven-page booklet and there was no detailed accounting of how much Canadians can expect to pay for each of the promises being made by Mr. Mulcair on the campaign trail.

Over all, the lack of detailed information provided by the New Democrats made it difficult to determine whether their numbers add up. But, it was clear that some of the promises being made by the NDP Leader have had to be modified to meet his commitment of a balanced budget.

Since late 2011, NDP politicians have accused the Conservative government of planning to cut $36-billion over 10 years from health care, starting in 2017-18, by replacing the annual 6-per-cent increases in health transfers to the provinces with increases based on the growth in nominal gross domestic product.

The New Democrats have said they would reverse that decision. And Peggy Nash, the party's industry critic, told reporters on Wednesday that the 6-per-cent increases to transfers would be restored.

But, she said, they would be used to pay for the slate of new health-care initiatives included in the NDP campaign platform such as a mental-health innovation fund, a half-billion dollars over four years for new clinics and to hire doctors and nurses, an Alzheimer's strategy, a seniors-care strategy and whatever other health announcements Mr. Mulcair has yet to make.

Ontario Health Minister Eric Hoskins said the Conservative decision to slash the Canada Health Transfer would result in $8-billion less for health care for Ontario over 10 years and accused the New Democrats of making health-care decisions without provincial input.

"Not only have the federal NDP failed to explain their proposal to Ontario," Dr. Hoskins said, "their plan dictates how health-care money is to be spent, without any meaningful consultation. That's not how you work with provinces and territories."

Absent from the NDP document is a major pledge to increase foreign aid. Mr. Mulcair had promised in May to set a multiyear target to increase foreign aid to 0.7 per cent of GDP, a pledge that could cost more than $8-billion a year if fully implemented. The party confirmed Wednesday that the foreign-aid target will not be met during the first mandate of an NDP government.

Canada's federal corporate tax rate had declined to 21 per cent between 2000 and 2007 from 30 per cent in 1980. It has since declined gradually under the Conservatives to 15 per cent as of 2012.

Labour economists including Jim Stanford have described this as a "failed experiment" and called for an increase.

However, University of Calgary tax expert Jack Mintz insists the lower rate has helped the economy and that raising it by two points will kill 150,000 jobs.

He also says it won't generate anywhere near the $3.7-billion in revenue the NDP expects.

"They won't even get a billion dollars in revenue," he said. "It's pretty easy for companies to just restructure and shift profits out of Canada."