I humbly bow in your esteemed presence, but you are wrong

I admit it stretches the limits of credibility. Me, with my dime store degree and “not much for book learnin'” going up against the most esteemed business expert in Canada but, I guess that’s what blogs are for. Here’s a segment from a story in the TJ. Read it and my comments below.

Jack Mintz, a professor of business economics with the J.L. Rotman School of Management at the University of Toronto and a fellow-in-residence with the C.D. Howe Institute, says New Brunswick needs bold and “smart” tax policies as it plans how to energize the provincial economy in order to achieve self-sufficiency.

A corporate income tax rate of 13 per cent certainly just puts New Brunswick in the middle of the pack. Why not tax everybody at the small business rate of five per cent? That would be pretty dramatic,” he said.

Mintz also had some blunt advice for New Brunswick’s myriad tax credit programs, many of which are designed as incentives for specific economic sectors or as aids to certain industries.
“Get rid of some of these little credits and things like that.

“That’s kind of what poor nations, less developed countries try to do, to target things. It really just creates a big fiscal cost where you could do things a lot better,” he said.

With all due respect, New Brunswick companies don’t pay much tax already. Less than 3% of the provincial budget comes from corporate taxes compared to, I believe, close to 10% or more in Ontario. When former Premier Lord cut the small biz tax rate to almost zero, the rate of small businesses growth actually got worse. Of course, that didn’t make old Volpe’s “report card”.

As for cutting large business tax rates, I have a theory that they don’t pay much tax here anyway. As I have pointed out elsewhere, BCE pays more corporate income tax (in total) than all New Brunswick companies combined (that’s Irving, McCain, Ganong, on and on and on all of them). Of course, they may be paying taxes elsewhere – who knows? but in New Brunswick corporations pay very little tax and I see no examples where cutting the overall corporate tax rate in a poor province does much good. In Ontario, which is dominated by medium and large business that do pay serious taxes (10% of the total provincial budget), maybe cutting those taxes might be stimulative but even there I would question it.

He also says to get rid of New Brunswick’s myriad tax credit programs. What myriad tax credit programs? There are a few but I wouldn’t call them a ‘myriad’.

Further I would go beyond and state that any tax cuts should be tied directly to job creation. If businesses want tax cuts, they should prove that money is at least in part being pushed back into local growth.

I mean think this through for a minute. We know that 98% or more of our RRSPs, RESPs and public pension investments are being put to use elsewhere – in places like India, China, the U.S., Latin America – and in large part in Ontario, Alberta, etc.

So, here is Mintz’s strategy. Cut taxes here so that entrepreneurs can make more money and put it into their savings which is driving economic development anywhere but here.

Not in my book. If they want tax cuts, tie them directly to more investment here.

Last, but most important point, here’s the quote:

“That’s kind of what poor nations, less developed countries try to do, to target things. It really just creates a big fiscal cost where you could do things a lot better,” he said.

Ontario ‘targets’ auto, aerospace, biotechnology, etc -with billions in incentives
Quebec ‘targets’ aerospace, biotech, animation, etc. – with billions in incentives
Alberta ‘targets’ oil & gas with billions in royalty incentives

I guess that’s what ‘poor nations’ do.

Last point. If you read up on the economic development history of Canada, C.D. Howe is at its core spending billions in defense funding to build up a huge military industry almost exclusively in Ontario and Quebec. Now the head of the institute bearing his name is telling New Brunswick not to ‘target’ things.

Maybe that’s the secret mandate of C.D. Howe. To screw Atlantic Canada in perpetuity.

My advice? New Brunswick needs to get a whole lot better at ‘targeting’ industry. At building a good environment for ‘targeted’ industry. The lack of effort over the decades has left us in the position we are in. Imagine if we had started to build a pharma industry when Quebec started in the 1970s. It might be us with the 50,000 high end pharma jobs. Imagine if New Brunswick had become the hub of the auto pact. Think about what might have happened if New Brunswick had tried to become the film capital of Canada (like B.C. did) or the lightening rod for Asian investment during the Hong Kong handover. These are all highly targeted efforts.

But Mintz sees what Mintz wants to see. No matter how many degrees or how scruffed up the pedigree, he is still peddling a narrow view of the world that defies what can be viewed in plain sight all around him.