Public sector workers paying for corporate tax cuts

'Public employees are being asked to make a contribution of $750 million towards a $3.6-billion tax cut for large corporations.'

By Larry Brown
National Secretary-Treasurer
National Union of Public and General Employees (NUPGE)

Ottawa (31 March 2010) - The Ontario budget for 2010 wasn’t the worst budget possible – in some ways. There are even many things to admire in it.

But this budget was among the best at making one simple point very clear: in the opinion of many governments these days, if you work for the public, providing important services, you will be expected to contribute some of your wages to the noble cause of corporate tax cuts.

Consider the numbers provided by the government itself:

• Public sector wage freezes will ‘save’ the government $750 million over two years.
• Corporate tax cuts will cost the government $3.6 billion over three years. The budget says about $1 billion of that will go to small business, so by definition the rest will go to large corporations.

Thus, the public’s employees are being asked to make a contribution of $750 million towards a $3.6-billion tax cut for large corporations. All the other talk about the deficit and the need to fight it is all very interesting, but you can’t sensibly talk about a focus on cutting the deficit if at the very same time you are voluntarily cutting your income by billions of dollars.

If the Ontario government didn’t cut corporate taxes, it would be able to pay public sector workers their $750 million and still have almost $3 billion left to fight the deficit. As it is, public sector workers aren’t helping to fight the deficit, they are helping to pay for the corporate tax cut.

'Pure fiction'

There is a fascinating chart in the budget documents about how cutting corporate taxes magically creates more revenue, because all the corporations use their tax cut to rush out and invest, which creates more jobs and more revenue for the government. It’s a lovely work of pure fiction.

After all the cumulative tax cuts for corporations in Canada, we should, if that fairy tale was true, be flooded with investment and new jobs and all the wonderful things that happen when corporations don’t pay their fair share.

Erin Weir, an economist with the United Steelworkers, succinctly put it this way:

“The previous round of corporate tax cuts begun in 2000 has increased after tax profits to record heights without a corresponding rise in business investment. In fact Canada’s ratio of business investment to profit has fallen to an all-time low.”

In other words even when times were good corporate tax cuts simply didn’t lead to new investment; they only resulted in higher corporate profits, which then weren’t taxed. The same story has played out in the federal budget, where public sector employees are going to be called on to contribute $6.8 billion of their wages and jobs to the ongoing corporate tax cuts, which will cost more than $21 billion over the next five years.

Over $100 billion

The Harper corporate tax cuts have already cost us over $100 billion, but allegedly the country needs more; more cuts in taxes for profitable corporations, so federal public employees are being asked to contribute their wages to line the deep pockets of these companies, so the companies in turn can afford the astronomical salaries of their CEO’s.

Federal employees aren’t helping to cut the deficit at all; that’s not where their money is going. It’s going to tax cuts for multinational corporations, plain and simple. How can anyone pretend this is about fighting the deficit when we’re giving away $21 billion in revenue for no good reason?

What is beyond dispute is that the $750 million the Ontario government wants to take out of the pay cheques of its employees is all money that would have been spent in the stores and businesses of Ontario. We know from bitter experience that if public sector wages are cut, public sector workers will spend less in their communities. Fewer houses bought, less furniture sold, fewer restaurant meals purchased, fewer new clothes, fewer cars and CDs and books bought, fewer haircuts, less discretionary spending all round.

All of the private businesses that provide these sundry services in the community will pay the price too. The average wage of public sector employees guarantees they will spend their money close to home, because they don’t earn enough to sock money away in off shore tax havens.

All this is mere fact. The myth is that public sector workers have to sacrifice to fight the deficit; the reality is that public sector employees are being asked to pay for corporate tax cuts.

The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members.