Labour tax policy draws inspiration from conservative sources

BC’s labour movement, always quick to criticize the Campbell government for its fiscal and economic shortcomings, has decided to offer some positive suggestions from surprisingly conservative – even very Conservative — sources.
Two economic policy papers debated at the BC Federation of Labour’s recent convention drew inspiration from such unlikely political leaders as former Social Credit premier Bill Bennett, Newfoundland’s Danny “Chavez” Williams and Alberta’s Ed Stelmach to backstop proposals for a dramatic overhaul of corporate tax and royalty regimes.
The recommendations were rolled up in the federation’s “action plan” and adopted by convention delegates as policy, making them the framework for labour’s BC economic agenda.
While one paper focused on a wide range of private sector initiatives, where four out of five BC workers have jobs, the other offers prescriptions to make the public sector a better pillar of a strong economy.
At the core of the policy, prepared by longtime BC budget analyst Will McMartin, and Iglika Ivanova, an economist with the Canadian Centre for Policy Alternatives, is a recommendation to increase public spending to 18 percent of BC’s gross domestic product, as it was in the era Bill Bennett and Bill Vander Zalm.
That’s a $4.5 billion lift to about $34.5 billion from the current 15.6 percent level under Gordon Campbell, a legacy of his many years of corporate tax cuts.
The federation argues this new revenue could fund:
•    an increase in health funding, where BC is spending less per capita than seven other provinces;
•    a province-wide childcare program, akin to Quebec’s, which generates $2 in economic benefits for every dollar invested, while freeing up more women to work and reducing child poverty;
•    a 50 percent lift in welfare benefits, with the goal of reducing homelessness and its associated costs;
•    about $400 million a year into affordable housing to create jobs and reduce poverty;
•    reduced tuition for post-secondary and apprenticeship training to improve workforce skills; and
•    a clear long-term budget commitment to the Auditor General so he or she can be sure the money is well-spent.
As the federation sees it, this sort of public spending will do much to restore luster to an economy in which, as the BC Business Council laments, “the sources of growth in recent years can simply be described as real estate and shopping.”
Where to find the new cash?
BC’s unions like the idea of a royal commission into taxation, the first in this province in a century, to identify the level and mix of taxes best suited to a strong economy.
But labour is impressed by the efforts of Williams and Stelmach to squeeze more money out of oil royalties. For starters, says the Fed, book about $1 billion a year based on Alberta’s expectations for increased revenue. And if you link BC water rates to consumer prices for the electricity generated you could add another $1.8 billion to $2 billion a year.
Then there’s corporate taxes. After reviewing the doubling of corporate profits between 2002 and 2008, the federation believes business should chip in an additional $2.5 billion a year, leaving about 80 percent of profits in the hands of business.
While this may cause fainting spells in corporate board rooms, the federation argues this leaves a significant share – about $1 billion a year — of Campbell-era tax cuts intact.
Crown corporations would not be let off the hook. Labour’s goal: make them step up for another $1 billion a year.
There you have it: a renewed public sector investing to make the private sector strong!

January 2010