Unglued

The Canadian Taxpayers’ Federation likes to make a big deal of that date in June when an average worker finishes paying taxes and gets to keep his hard-earned money.

The unions like to complain about the end of January when corporations reach Tax Freedom Day.

But few of us focus on the illustrious group of 100 Canadian CEO’s who at 1:11 p.m. on January 2 have earned more money than an average full-time Canadian worker will earn the rest of the year.

Remuneration for top CEO’s of publically traded companies has been on a sharp trajectory upward since the early 1980’s.  In a report released by the Canadian Center for Policy Alternatives, the CEO-to-worker ratio in 1982 was 42:1; for every $42 earned by a CEO, a Canadian worker averaged $1.  By 2012, that ratio had raised to 171:1, or $7.96 million for CEO’s versus $46,635 for the average Canadian worker.

Now, it is eloquently argued and often believed that these men and women deserve so much more compensation than their underlings because they are the ones who take the leadership and risks to make investments and create jobs.

Hand in hand with this belief, successive governments from Chretien through to Harper have decreased corporate taxes (from 21 per cent to its current rate of 15 per cent) further promoting the idea that corporations would re-invest their tax windfall and create jobs.

Unfortunately that hasn’t worked out too well.  At a time when the Canadian government is deep in debt and aggressively promoting a non-existent job creation program through costly television ads, corporations are sitting on hoards of cash.

Once upon a time, governments collected corporate taxes to use as stimulants when they wanted to encourage corporations to create jobs in risky times. Today that flex money is no more.

Yet, that doesn’t mean corporations haven’t stopped coming to the taxpayer trough for more. Just this week at the Detroit Car Show, Chrysler unveiled plans to manufacture one of its new models in Windsor if the federal and provincial governments kicked in millions of dollars to re-fit the line.  Last year, it was Ford that ponied up to the taxpayer trough and received millions to refit another Ontario production line.

Canada shed 60,000 full-time jobs in December 2013. Twelve thousand full-time jobs were lost in Alberta, 8,000 of them resource-based.   Canada-wide only 14,000 new jobs were created, primarily part-time, service industry or government jobs.

The government’s corporate tax reductions were meant to put money in the hands of those who could best innovate and create jobs – the private sector. So why hasn’t it worked?

In June last year, Finance Minister Jim Flaherty was mystified when referring to the hoarding of cash by corporations.  “At a certain point, it’s not up to government to stimulate the economy, and they (corporations) have lots of capital.”

But that’s where ideology and reality come unglued.

There is not a corporation in the world whose mandate is to stimulate the economy, create jobs or be innovative.  Corporations do all of these things, of course, but they are all by-products of profit-making.

These by-products are generated for the benefit of the corporation, its CEOs and shareholders, not the economy.  Corporations are just as happy to reduce or outsource jobs; divest or not invest at all, or just sit on cash if it means higher profits and richer compensation packages.

It is only governments that have the priority to stimulate the economy, and that’s usually tied directly to winning the next election.

The Harper Conservatives are learning, as all previous governments before them have learned, that reality is just so much more complicated than ideology.

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