In his October 22 economic update, Ontario Treasurer Dwight Duncan told us how well the Liberal government is handling the global economic crisis. Then he got to the nub of things: 205,200 jobs lost in the first 7 months of the year, an official unemployment rate projected to rise to 9.9% this winter, the continuing decline of manufacturing and secondary industry, forestry, mining, and construction. For working people, that means falling incomes, more personal bankruptcies, and a huge uptake in Ontario Works (social assistance). Seriously under-funded social programs and public services will no longer be paid from the corporate and personal income taxes which have sustained them for 60 years. Social programs will now be paid for (or not) out of revenues generated by the HST (Harmonized Sales Tax) which will be introduced in July 2010.
Why is this happening? Because corporate profits fell 49.7% in the last year, and corporate tax revenue fell 48.1% in the same period. According to the Liberals, it's up to the public to bail out those corporate profits by cutting the Marginal Effective Tax Rate by 50% (from 32.8% to 16.2%), to make Ontario one of the lowest corporate tax jurisdictions in the industrialized world for new investment.
How will they do it? By eliminating the Capital Tax (a tax on capital, not labour), by reducing the Corporate Income Tax (CIT) by $4.5 billion a year, and by rebating $4.5 billion in Input Tax Credits to corporations which, under the HST will pay a fraction of the sales tax they pay today. That's why corporations support the HST.
The cut to the provincial CIT from the current 14% to a bargain basement 10%, combined with Harper's cut to the federal CIT to a new low of 15% by 2012, will result in a combined 25% CIT rate. That's lower than most corporate tax rates in the industrialized world, and 15 percent lower than the US Great Lakes states with which Ontario competes.
Who will pay then?
The public of course. The Liberals have cut a deal with the Harper Tories to legislate a 13% HST on all goods and services sold in the province, with a few exceptions. The HST will add another 8% to many necessities currently taxed at 5%. Like other VAT (value added) taxes levied in Europe and elsewhere, the initial rate increases over time. The 13% HST will almost certainly do the same. It's a shell game that will see working people take on almost 100% of the tax load, while corporations see their sales tax shrink to almost nothing. To sweeten the deal, the Liberals will send three cheques worth up to $900 to each Ontario household. That shows just how important this tax shift is to Big Business.
Besides bailing out corporations on the backs of working people through the imposition of the HST, the economic update announced that the Treasury Board/Management Board of Cabinet would "conduct a rigorous strategic spending review focused on high impact areas to ensure continued relevance and effectiveness of government programs and services and the way they are funded." Like Barack Obama's stated plan to appoint a committee charged with eliminating "wasteful spending" in government programs, this is a lot of flowery language designed to obscure the fact that social programs will be facing drastic cuts. In tough economic times, it is always workers - the lower and middle classes - who are asked to tighten their belts.
In addition, the Toronto Star is reporting that McGuinty has floated the idea of resurrecting the "Rae Days" of the 1990s. These forced, unpaid days off for public sector workers - "Dalton Days" this time around - are painted as necessary to pay off the province's $24.7 billion deficit, but it's clear that the move is a political ploy designed to pit workers against each other while deflecting attention from the Liberals' unabashedly neoliberal approach to the recession: more corporate tax cuts.
McGuinty's gall is infuriating. He directs widespread anger among Canadians to public sector workers, who he claims have been "sheltered" from the recession. It's not fair, McGuinty goes on, that private-sector workers are feeling the pinch while public-sector workers "clearly" are not. Representatives from the Ontario Federation of Labour, Ontario Nurses' Association and other public sector unions beg to disagree, but what's most notable in McGuinty's interpretation is his kneejerk hostility to the public sector and his kowtowing before the private sector, specifically the leaders of Big Business.
If public sector workers really were "sheltered" from the recession, McGuinty should have taken this as an indication of the need for even greater employment opportunities in the public sector, combined with increased stimulus spending by the government and a rash of good old-fashioned Keynesian public works projects. But after 30 years of economic policy dictated by a neoliberal fixation on fiscal conservatism and corporate tax cuts, such a people-centred approach is apparently off the table for the Liberal government, which prefers to soak the working class. A certain opposition leader hit the proverbial nail on the head:
NDP Leader Andrea Horwath said "it does not make any sense" to be considering such draconian measures at the same time as billions in corporate tax cuts are on the horizon for Bay Street.
So when's the next election?
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