Ontario’s Corporate Handout Strategy Under Scrutiny
In a recent development, the Ontario government has allocated an additional $100-million to the Invest Ontario Fund, a move that has reignited the debate on the efficacy of corporate handouts. The fund’s expansion is aimed at providing more financial support to large businesses, but it also highlights a growing concern: the cost to taxpayers.
Ontario and Quebec have been in a competitive race, with each province trying to outdo the other in terms of taxpayer-funded subsidies to corporations. Ontario, under Premier Doug Ford, has seen a significant increase in this area, with an average of $9.1-billion per year since 2018 being spent on corporate welfare. This represents a staggering growth of over 100% in just five years.
A striking example of such spending is the $9.4-billion given by Ontario to automotive giants Volkswagen and Stellantis, with additional funds coming from the Trudeau government. In comparison, Quebec’s average annual corporate handouts stand at $6.3-billion, which, while lower in total dollars, still surpasses Ontario on a per capita basis.
These investments raise important questions about alternative economic strategies. Critics argue that instead of direct subsidies to select corporations, governments could reduce corporate tax rates to attract a broader range of businesses. For instance, if Ontario were to eliminate its corporate welfare programs, it could potentially reduce the corporate tax rate from 11.5% to 6.5%, making it highly competitive both nationally and globally.
Such a tax cut would position Ontario’s combined federal and provincial corporate tax rate at 21.5%, lower than that of most U.S. states when considering their federal and state corporate taxes. This could be a significant draw for businesses seeking a more favorable tax environment.
Despite these potential benefits, Ontario’s current strategy focuses on selective corporate funding and maintaining regulatory frameworks that some argue hinder economic growth. Since 1990, Ontario’s real per-capita GDP growth has averaged a mere 0.6% annually, suggesting that large government subsidies have not effectively stimulated the economy.
Proponents of change suggest that lowering corporate taxes could attract diverse businesses without compromising essential government services like health or education. As Ontario continues to grapple with economic challenges, calls for an end to government handouts and a shift towards tax competitiveness are becoming increasingly louder.
The debate continues on whether Ontario will maintain its current course or pivot towards a new economic strategy that prioritizes lower taxes over direct subsidies to corporations.
