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Editorial cartoon by Brian Gable. (The Globe and Mail)
Editorial cartoon by Brian Gable. (The Globe and Mail)

Ibbitson replies

What has Stephen Harper done for Canada's economy? Add to ...

The Globe and Mail's Ottawa Bureau Chief will be responding to a selection of reader comments throughout the election campaign. Today, John Ibbitson replies to reader questions on Harper's approach to the economy ( Music to Tory ears: Economy top of mind among voters and Peanut fight avoided as NDP incumbent crashes Harper campaign stop).

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From reader blue_note2: So how are the Banks going to create jobs with lower corporate taxes? Maybe reduce interest rates for companies who want to borrow money. Oh I forgot, the Banks are in business to make money from using other peoples [sic]money and lowering rates would drive away stock holders,and lower their profits. Wait a minuet [sic] lowering corporate taxes will induce companies to set up shop in Canada. Imagine all the tellers the foreign banks can hire when they set up shop in Canada, this is sure to make a huge dent in unemployment. No, sorry. I fail to see how lowering the corporate tax rates for one of the most profitable businesses in Canada is going to benefit anyone but the shareholders.

John Ibbitson: While banks compete with each other - mine suddenly becomes very friendly when the mortgage is due for renewal - overall interest rates are set by the Bank of Canada, so lowering corporate taxes won't affect interest rates one way or another.















But the banks are not the only businesses in Canada, thankfully. Lowering corporate rates helps mining companies invest in exploration, newspaper companies build new presses (and upgrade their computer servers), car manufacturers to improve productivity, and so on.

The question is, what is the sweet spot, the rate that allows governments to raise respectable levels on tax revenue on corporate income, while not deterring investment? Both the Liberals and the Conservatives agree the old rate was too high, which is why Paul Martin began lowering corporate taxes when he was finance minister. Jim Flaherty decided 15 per cent was optimal, which is where we will be next January 1 if the Conservatives are re-elected. The Liberals believe 18 per cent would keep businesses competitive while permitting investments in education, home care and child care.

So on top of everything else, your political leaders are asking you decide on the optimal rate of corporate taxation in Canada. Good luck.

From reader jo_ingblats: The only thing that I can think of that Harper did for the economy is his stimulus package. But how many people actually think a majority Harper government would have gone ahead with stimulus? It's outrageous that he get the credit for what was obviously an opposition initiative. His first economic statement to parliament after the 2008 election was that he would end party subsidies. Imagine that! His economic plan is to end subsidies for political parties. Anyone who is seriously following the news knows that Harper has had a very limited impact on the economy, and deserves no credit for any of its successes.

John Ibbitson: I addressed the question of economic stimulus Monday. You can find it here. As for ending party subsidies, it really should be more of a campaign issue.

Time was, any Tom, Dick or corporation could donate to a political party. But the sponsorship scandal caused the Chretien government to prohibit corporate and union contributions. Only individuals can contribute and only up to a certain amount. To compensate, the Liberals awarded political parties a public subsidy for every vote cast. Today it's around two dollars.

The Conservatives want to eliminate the public subsidy, continue to prohibit corporate donations, but raise the individual maximum. The opposition argues this will lead to "bundling,"--powerful individuals getting large groups of people together to donate the limit, bringing in huge infusions for the party that has the best fundraisers. The opposition is right. That's what will happen.

The question is: is that a better or worse way for a party to receive funds through bundling than for it to simply be handed money by the taxpayer? Should the Bloc Quebecois be able to run campaign after campaign with donations from all Canadians, even though it raises relatively little money of its own within Quebec? (A Bloc fundraising gala outside Quebec would be fun to attend.)

Personally, I'm agnostic on the issue. I can see strengths and weakness in both systems. But it is certainly true that if the Conservatives win a majority, public funding of political parties will quickly become a thing of the past.

Follow on Twitter: @JohnIbbitson

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