An interesting nugget in last week’s Drummond report is Table 11.1, an updated version of Table 2 from “Ontario’s Tax Plan for Jobs and Growth” (2009).
It provides a sectoral breakdown of the McGuinty government’s recent business tax breaks: HST input tax credits, cutting the corporate income tax, and eliminating the corporate capital tax.
The combined annual cost of these tax breaks, when fully implemented, will be higher than originally estimated: $8.7 billion vs. $8.4 billion.
But they will help the manufacturing sector even less than originally estimated: $1 billion vs. $1.2 billion.
The old table suggested that these measures would be a wash for the financial sector. The HST would apply to some previously exempt financial services while finance companies would pay less corporate income and capital tax.
The new table reveals a net gain of $590 million for the financial sector. In particular, the estimated cost of eliminating the corporate capital tax for banks has jumped from $520 million to $740 million.
Restoring a capital tax for banks in Ontario is looking more appealing. The great Wall of Saskatchewan’s Maoist government, for example, continues to levy such a tax.
Erin Weir is an economist with the United Steelworkers union and a CCPA research associate.