Dear Ontario: Corporate subsidies aren’t the path to prosperity

The Ontario budget on Tuesday included an extra $100 million for the Invest Ontario Fund to dole out more funds to large businesses.

This underscores a troubling fact: when governments are competing for who can give the largest handout to wealthy corporations, taxpayers are the losers.

In recent years, Quebec and Ontario have been engaged in a race to the bottom to see which government can dole out the most taxpayer dollars to corporations the fastest. Quebec once had a huge lead, but under Premier Doug Ford’s watch Ontario is giving the king of handouts a run for its money.

In the past couple of years, Ontario has overtaken Quebec as the biggest champion of taxpayer-funded subsidies.

Ontario has spent an average of $9.1 billion a year in constant dollars on corporate handouts since 2018, all under Ford’s watch. That’s more than a 100 per cent growth in corporate welfare in just half a decade.

A most egregious example is the $9.4 billion Ontario is giving to auto giants Volkswagen and Stellantis along with even more taxpayer cash infused by the Trudeau government.

How does that compare with Quebec? Over the same period, Quebec has given out an average of $6.3 billion in constant dollars in corporate handouts. Quebec is still handing out more per capita, but Ontario takes the top prize when it comes to the dollar amount.

When governments spend billions on corporate handouts, there’s a trade-off cost that most politicians never want to talk about. For all of the billions governments give away in corporate welfare payments, governments could instead be cutting taxes to attract businesses of all shapes and sizes.

The $9.1 billion Ontario spends on average every year on corporate welfare could be doing a lot more good than sitting in the pockets of a handful of wealthy corporations. If Ontario eliminated all of its corporate welfare tomorrow, the Ford government could easily cut Ontario’s corporate tax rate down from 11.5 per cent to 6.5 per cent.

What kind of impact would that have on the economy?

Should Ontario make that move, Ontario’s corporate tax rate would be less than half of that of any Atlantic province and 1.5 percentage points lower than even Alberta.

That’s a recipe for attracting businesses from all over Canada to Ontario.

Cutting corporate taxes would also make Ontario competitive in the global arena.

If Ontario were to cut corporate taxes down to that 6.5 per cent, the combined federal and provincial general corporate tax rate in Canada’s largest province would be 21.5 per cent. Given that the United States’ federal corporate tax rate is 21 per cent and most states have a state corporate tax in addition, businesses’ tax burden would also be lower in Ontario than in most of the United States.

That’s a real plan for attracting jobs, expanding the economy and ensuring that taxpayer dollars go toward paying for the essentials, not for handouts to rich corporations.

Add in some much-needed regulatory reform, and growth in Ontario would be well on its way.

Ontario’s strategy of cherry picking a handful of corporations for government handouts, coupled with endless regulation, simply isn’t working for the province’s economy.

The fact is, Ontario has gone through a period of severe economic decline.

Since 1990, Ontario’s real per-capita GDP has been growing on average annually by a paltry 0.6 per cent. If big government handouts to wealthy corporations were the answer to Ontario’s sluggish economy, surely proponents would be able to show signs of real growth.

The lack of growth from subsidies should surprise no one. When governments give out handouts to companies to create jobs at astronomical prices, such as the $4 million per job through deals with Volkswagen and Stellantis, it’s little wonder why big government doesn’t stimulate economic growth.

You just cannot subsidize your way to prosperity.

Sure, spending $9.4 billion on handouts to Volkswagen and Stellantis may have landed Ontario two EV battery plants. But imagine how many other companies aren’t coming to Ontario because of the province’s lack of competitiveness.

If Ontario had the lowest corporate tax rate in both Canada and much of the United States, businesses of every character would be flocking to the province.

And under this scenario, no government spending on core priorities like health or education would have to be cut.

The bottom line is that the same old policies aren’t working. It’s time for Ford to end government handouts and chart a bold new course by cutting corporate welfare and lowering corporate taxes.

Daniel Dufort est président et directeur général de l’IEDM. Il signe ce texte à titre personnel.