Canada’s welfare state is disintegrating. Meanwhile, Canada’s corporate welfare state has never been stronger.
In his 2018 Fall Economic Report, Finance Minister Bill Morneau announced that corporations would receive $14 billion in new tax breaks. Enough money to fund a national daycare program is being handed over to the business sector.
Although the rationale is the supposed need to maintain Canada’s competitiveness in the face of U.S. President Donald Trump’s gargantuan tax cuts, it is actually a question of priorities — or, more accurately, constituencies. The federal government has made it clear to whom it feels accountable.
In a time of record profits, Canadian corporations already receive billions in subsidies every year, not to mention massive corporate tax cuts and loopholes and the roughly $3 billion in taxes that wealthy Canadians and corporations evade through offshore havens on an annual basis. Despite perennial promises by government to crack down, that money continues to accumulate, sloshing around the global economy in an era of unprecedented wealth and inequality.
Victory for the one per cent
This triumph of the “one per cent” follows decades of cuts to the social welfare programs that strengthen the fabric of our society. According to a report by the OECD, Canada ranks 24th out of 34 countries in social expenditures as a percentage of GDP.
Austerity-minded governments have insisted that we cannot afford the rising costs of social programs without incurring enormous deficits or a higher tax burden on ordinary Canadians. But this argument does not, apparently, apply to tax breaks for corporations. And the double standard is not new.
In the 1972 federal election campaign, the New Democratic Party denounced “corporate welfare bums.” Federal leader David Lewis (grandfather of co-author Avi Lewis) railed against multinational corporations that received significant subsidies from the government while at the same time escaping their fair share of taxes.
He said in his book Louder Voices: The Corporate Welfare Bums:
“I oppose in principle the tax concessions and loopholes for which large, often foreign-owned corporations benefit at the expense of the ordinary Canadian taxpayer. The latter is forced to carry a heavier tax burden because the corporations do not pay their share.”
Lewis added that “while social welfare legislation has been subjected to the most critical scrutiny as to its costs, benefits and consequences,” and been consistently targeted for cuts, “the attention of Canadians has been deflected from any examination of…the corporate welfare state.” He went on:
“Welfare is for the needy, not big and wealthy multinational corporations.”
This campaign proved enormously successful. The NDP elected 31 MPs, their biggest caucus to that point. They also held the balance of power in a minority Liberal government. Canadians proved receptive to calls to re-balance the tax burden and direct government spending to benefit people over corporations.
Firms don’t gripe when they get bailouts
And yet, 45 years later, corporations continue to receive billions of dollars in grants and tax breaks, and social spending suffers. Corporations extol the value of the free market and denounce increased government spending. Except, of course, when government largesse flows their way.
What do Canadians get for these billions of dollars in corporate welfare payments? We’re told that corporations require grants and tax breaks to remain competitive, to create jobs and to stimulate the economy.
And yet a singular feature of corporate welfare is that it’s almost always free of any conditions to ensure those benefits actually occur.
The most striking example in Canadian history happened just recently. General Motors, a company that makes about $20 billion each year, is closing its Oshawa plant, bringing to an end a century of automotive production in that city.
Just a decade ago, Canada engineered a $10.8 billion bailout of the company, with an eventual cost to the public purse of $4-5 billion. For all those tax dollars, federal and provincial politicians purchased zero leverage. The plant will now close, and 2,200 people will lose their jobs while our governments claim utter impotence to intervene.
Even more disturbing is the estimated $3.3 billion a year that our federal and provincial governments bestow on the large oil and gas producers to continue polluting the planet.
It’s time to pay us back
And in a few years, we could look back at current oil and gas handouts as a bargain. Recent revelations suggest that the industry is sitting on $260 billion of environmental liabilities, which could very well fall to the public purse.
If David Lewis were alive today, he would doubtless discover new levels of eloquent outrage. He might say: If Canada’s largest 100 corporations paid the full amount of even our insufficient corporate tax rate and did not take handouts, we would have tens of billions more each year to devote to the priorities of the many, not just the few.
We could fund that national day care program, make post-secondary education a free public service, build clean electric mass transit across the country and many other programs that would benefit the people of Canada.
In an era of climate crisis, precarious work and instability, it’s time the corporate welfare bums paid us back.
Written by Roberta Lexier, Associate Professor, Department of General Education, Mount Royal University