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In the end, Ontario's tax on rich largely a wasted effort

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Money could have gone to jobs I have no strong feelings one way or the other on taxing Ontario's wealthy, but I believe that if you're going to do it, you should make it count.

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That's not what's happening, exactly, though, because the money could be better spent.

Dalton McGuinty, the premier of Canada's most populous province, struck a deal with Andrea Horwath, the leader of the New Democratic Party, so he could get his budget approved in a vote this afternoon. Which he did. The Liberals supported it, the Conservatives opposed it, and the NDP abstained.

Those in Ontario earning more than $500,000 now will be hit with a temporary surtax of 2 per cent, which the Liberal premier projects will bring in an added $470-million next year, but which some economists believe will be less than that.

As deputy chief economist Douglas Porter of BMO Nesbitt Burns sees it, there are two points: The actual take will "almost certainly be less (possibly quite a bit less)" than the estimate, and that "beyond any direct impact (and a further complication of the tax system), possibly the most serious potential damage from such a move is its impact on perceptions - the province is at risk of being seen as a high-tax/high-cost jurisdiction, potentially blunting investment."

Warren Lovely of CIBC World Markets, however, said that "economists will lament the introduction of the new tax, although on its own is unlikely to act as a serious catalyst in driving high income earners away."

Whatever the amount, the money will be used to help bring down the province's deficit. Ms. Horwath wanted the money to go toward programs, but in the end succumbed and allowed it to go toward the deficit, which is projected at more than $15-billion this year, The Globe and Mail's Karen Howlett reports.

As Mr. McGuinty put it, the NDP wanted a tax on the rich, and he wanted to pay down the deficit at a faster pace.

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So it's a convenient deal for the premier. But in the end, the tax-the-rich plan is simply a plan to tax the rich.

Ms. Horwath did it simply because she could, when what she should have done was pushed harder, threatening to defeat the minority government's budget, to put that money to better use.

It's true that Ontario is the most stressed among Canada's provinces when it comes to fiscal matters, but so, too, is it stressed when it comes to its economy.

Indeed, Mr. Lovely noted today that "we're inclined to view the budget plan and the government's initial progress on the deficit reduction as sufficient to put off additional negative pressure on the province's credit rating for now."

Ms. Horwath should have done what any NDP leader worth her salt would have done, which is to demand that money go to program spending, particularly on the jobs front.

Ontario has already won the support of the ratings agencies for its fiscal plans, although it's shakey, and I'd argue that means the province has more pressing matters on its hands at this point. Consider that unemployment is projected to average 7.7 per cent this year, and won't fall below 7 per cent until 2015.

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Ms. Horwath could have, and should have, held out, not simply push for a wealth tax simply because it's the flavour of the month.

Apple beats estimates Shares of Apple Inc. climbed in after-hours trading today after markedly beating the estimates of analysts, turning in exceptional growth in its second quarter.

The technology giant's profit climbed to $11.6-billion (U.S.) or $12.30 a share, diluted, compared to $6-billion or $6.40 a year earlier. Revenue surged to $39.2-billion from $24.7-billion.

Some key numbers:

  • Apple sold 35.1-million iPhones in the quarter, up 88 per cent
  • Sales of iPads surged 151 per cent to 11.8 million
  • Sales of Mac computers rose 7 per cent to 4 million
  • Sales of iPods fell 15 per cent to 7.7 million

"The new iPad is off to a great start, and across the year you're going to see a lot more of the kind of innovation that only Apple can deliver," said chief executive officer Tim Cook.

Apple also forecast third-quarter revenue of about $34-billion and earnings per share of $8.68.

Rogers profit slips Canada's Rogers Communications Inc. posted a drop in first-quarter results today, missing analysts estimates.

The telecom and media giant, one of Canada's biggest players, earned $305-million or 57 cents a share, diluted, in the quarter, down from $335-million or 60 cents a year earlier. Adjusted profit slipped to $356-million or 67 cents from $423-million or 76 cents.

Revenue also dipped, to $2.95-billion from $2.99-billion.

Notably, revenue in its wireless operation fell to $1.71-billion from $1.72-billion. It managed to add 47,000 subscribers for its second busiest second quarter for smartphone acquisitions ever, The Globe and Mail's Steve Ladurantaye reports, but with consumers splintering off to other companiesit was unable to increase its revenue from a year ago in the division.

Despite highly competitive markets, particularly impacting both the wireless and cable portions of our business, we continued to leverage our technology leadership to deliver new and innovative products and services while at the same time taking decisive action during the quarter to drive operational efficiencies," said chief executive officer Nadir Mohamed.

Greece sinks deeper Greece may have have reached a deal to restructure its debt, but its economy shows no signs of gaining much traction.

The economy contracted by an ugly 6.9 per cent last year, with the decline worsening in the final quarter, and, according to the Bank of Greece, is projected to sink by a further 5 per cent this year.

Bank of Greece Governor George Provopoulos painted a troubling picture at a meeting today, and he urged politicians and citizens alike to get on with the job of reform as the country heads toward an election.

"The economic situation, both at home and abroad, leaves no room for complacency," he said.

"To take advantage of the new opportunity, we must promptly implement what we have agreed to and make up for previous delays. There is no easy way out of the crisis. The adjustment must be pursued with determination. The current pre-electoral period has temporarily sidelined planned reforms. If, after the elections, there is any question about the will of the new government and society to implement the program, today's favourable prospects will be reversed."

As The Globe and Mail's Brian Milner writes in today's Report on Business, this comes amid mounting pressure across the 17-member euro zone, as political and economic uncertainty rule the day.

Teck profit slips Canada's Teck Resources Ltd. posted a dip in first-quarter profit.

Teck earned $218-million or 37 cents a share in the quarter, down from $461-million or 78 cents a year earlier, as revenue rose almost 8 per cent to $2.5-billion.

Excluding one-time items, profit increased to $504-million or 86 cents, just shy of analysts estimates as tracked by Bloomberg News.

"With a strong balance sheet and strong cash flow, we are well positioned to successfully pursue our longer term growth plans," said chief executive officer Don Lindsay.

Retail sales slip Canadian car dealers suffered a setback in February, having had a boffo January.

Over all, Canadian retail sales slipped 0.2 per cent in February from January, Statistics Canada said today, but that was driven by a weeker showing among auto and parts dealer.

Sales actually rose 0.5 per cent when that category is factored out, the agency said.

Over all, five of 11 sectors tracked posted declines, accounting for 57 per cent of total sales. In straight volume terms, sells slipped 0.6 per cent.

"Retail sales have seen precisely no net growth since the start of the year," said deputy chief economist Douglas Porter of BMO Nesbitt Burns.

"While confidence and jobs have firmed recently, the consumer is in a cautious frame of mind. High debt loads, high gas prices, and the prospect of higher interest rates suggest that caution will persist."

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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