Posted: Wednesday, 14 December 2011

OTTAWA – The President of the Canadian Labour Congress has written to Finance Minister Jim Flaherty requesting that in his next budget he reverse planned tax breaks for corporations.

“The government keeps cutting corporate taxes in return for a promise that the private sector will use that money to create jobs but the strategy is simply not working,” says Ken Georgetti.

The Conservative government has dropped the federal corporate tax rate from 21 per cent in 2006 to a planned 15 per cent for 2012. That will cost the treasury about $12 billion in foregone tax revenue. At the same time, the cash reserves for non‑financial corporations have grown from $157 billion in 2001 to $477 billion in the second quarter of 2011.

“Tax cuts rob the government of revenues that could be put to good use creating a greater number of jobs in infrastructure projects and other much needed public investments,” Georgetti says. “Government should be investing these billions of dollars in Canadian families rather than giving taxpayers’ money to corporations that don’t need it.” He notes that the Royal Bank of Canada and the Bank of Nova Scotia have recently announced healthy profits for the period ending on October 31, and clearly don’t need any more tax breaks.

Georgetti adds, “Corporations aren’t living up to their part of the bargain to create jobs in return for tax cuts, so let them give that money back. We have long passed the point where Canada needs more corporate tax cuts to be competitive with other nations.”

The Canadian Labour Congress, the national voice of the labour movement, represents 3.3 million Canadian workers. The CLC brings together Canada’s national and international unions along with the provincial and territorial federations of labour and 130 district labour councils. See below for a copy of the letter to Finance Minister Flaherty: www.canadianlabour.ca. Follow us on Twitter @CanadianLabour

Contact: Dennis Gruending, CLC Communications: 613-526-7431 or
mobile and text: 613-878-6040 Email: dgruending@clc-ctc.ca

Letter to Finance Minister Flaherty

Dear Minister Flaherty:

I write to urge you to take immediate measures to sustain economic recovery in Canada by investing in jobs, while cutting back on expensive and unproductive corporate tax breaks which do not create jobs and add to the deficit.

Last month's labour force numbers show a serious deterioration of the jobs situation. Over the past two months, we have lost 73,000 jobs and the national unemployment rate has risen sharply, from 7.1% to 7.4%.

Household spending and the housing sector are slowing now that jobs are being lost, wages are falling, and families have record high levels of debt.

When I met with the Prime Minister before the G20 summit, he indicated that the Government of Canada would respond if there was a serious threat to the economic recovery. You have also said that you are prepared to change course if needed.

You must act now, before it is too late.

Canada’s Economic Action Plan, introduced in the 2009 budget, was by no means perfect, but major government investments in public infrastructure and temporary improvements to Employment Insurance, including job sharing and training measures, helped cushion the downturn and set the stage for a quicker recovery than would otherwise have been the case.

Today, the government should be planning a new round of major public investment projects which would create jobs now, while also meeting our longer term needs. Public transit investments, for example, create jobs in construction and manufacturing now, are good for the environment, and significantly raise private sector productivity.

The government also needs to be planning improvements to Employment Insurance (EI) in the event of a major new downturn, including measures to expand access to EI regular and training benefits now that the proportion of unemployed workers who receive benefits has fallen to a record low of four in ten.

The funds needed to finance such job creation measures can be found by reversing the failed policy of corporate tax cuts. Corporate tax cuts since 2007 will cost the Government of Canada $12 billion in revenues in 2012.

Corporate tax cuts have simply been banked by corporate Canada instead of invested to create jobs. In fact, corporations have paid out more in dividends to shareholders and are now sitting on close to half a trillion dollars in cash.

Meanwhile, the federal government plans to cut spending on public services and to cut public sector jobs to deal with a deficit, which is a self-inflicted wound largely created by these unproductive corporate tax cuts. Despite their promises, corporations have failed to create the jobs they said would be created by reducing the corporate tax rate, and taxpayers are left to make up for the revenue shortfall with reduced public services.

It's time that taxpayers get value for their money. If corporations are not creating jobs, yet are reaping the benefits of no-strings-attached corporate tax cuts, then they should be required to give that money back to the taxpayers of Canada. The past performance of corporate Canada and the fact that they are sitting on half a trillion dollars in cash instead of investing in job creation surely indicate further cuts to corporate tax rates can't be justified, and in fact should be reversed.

Minister, we need effective ways to create jobs rather than no-strings-attached corporate tax cuts which add to the deficit. Given the serious deterioration in the jobs situation in Canada, it is time for the government to seriously re-think its priorities.

Yours sincerely,

Kenneth V. Georgetti
President