Ontario delivered on taxes. Business’s turn to step up – by Jeffrey Simpson (Globe and Mail – January 10, 2014)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Hello, Queen’s Park. Hello, Toronto. Hello, Ottawa. Anybody home?

Ontario continues to stagnate while provincial politicians play games in a minority government, Torontonians are fixated by the Rob Ford gong show and the Harper Conservatives remained preoccupied by their western base.

Ontario’s task force on competitiveness and productivity recently released its 12th annual report and discovered that after inflation, Ontario’s gross domestic product has grown by just 6 per cent since 2002. That paltry growth has left the province 14th among comparable provinces and U.S. states, with only Florida and Quebec lower.

Sure, the task force has recommendations and the occasional critique of government. But what really stands out is its criticism of business, whose lobbyists and bullhorns in the media are always preaching for lower taxes.

Ontario has delivered. The province lowered corporate taxes. It harmonized the provincial and federal sales tax into the Harmonized Sales Tax. It eliminated the capital tax. It reduced the marginal effective tax rate. In other words, it followed business’s prescriptions, and they haven’t worked. At least not yet.

Maybe things would have been worse had this agenda not been followed. But as it is, the task force notes, “businesses have not fully taken advantage of the many incentives that have been created to promote growth. This must change.”

Two public policy issues – the task force strangely doesn’t mention a bunch of others – are holding Ontario back. Investment in infrastructure, especially transportation in and around Toronto, is woefully inadequate. And the education and training systems are not geared to preparing young people for the job market, an ambition that universities usually resist, arguing they are not vocational schools.

Ontarians work less than people in many comparable jurisdictions – 35.3 hours compared to 38.6 hours on average elsewhere. This partly reflects a weak job market – and partly a “higher propensity to take more weeks of vacation, especially among higher-earning individuals,” the task force notes.

But back to business, as it were. Report after report has lamented the poor research and development record of Canadian businesses, despite very generous tax incentives. They also don’t invest much in employee training. Machinery and equipment investment in Ontario was 32 per cent lower per worker than in U.S. competitors in 2011.

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