The budget delivered this week by Ontario Premier Doug Ford’s government contains more than $1 billion worth of annual tax breaks and hydro subsidies that will flow to businesses even when the COVID-19 pandemic is over.
It’s a clear sign that Ford is not letting the fight against COVID-19 divert him from his pro-business mission as premier.
The government pitched the themes of this budget as “Protect, Support, Recover,” all involving the response to COVID-19. While the budget doesn’t have an “Ontario: Open For Business” bumper sticker slapped on its cover, there’s evidence that this is a theme too.
Finance Minister Rod Phillips even uses those very words in his written introduction.
“Before COVID‑19, important progress had been made in our government’s commitment to once again make Ontario open for business,” says Phillips.
“Still, much work remained, including addressing the previous government’s hydro mess, uncompetitive taxes, and too many unnecessary regulations and red tape,” he adds. “The pandemic has only underscored the urgency of taking steps to create the right conditions for growth.”
The three key measures in the budget that help business are:
- More than 200,000 Ontario businesses will pay less property tax, with a cut to what’s called the business education tax. Estimated annual tax break: $450 million.
- Changes to the employer health tax, so that 90 per cent of Ontario businesses will no longer have to pay it. Estimated annual tax break: $360 million.
- A subsidy to reduce industrial and commercial hydro rates by roughly 15 per cent. Estimated cost to taxpayers: $1.2 billion over the next three years.
“We have to create the environment for companies to come here, rather than leave our province for other areas or south of the border,” Ford said during his budget-day news conference, when I asked him for the rationale behind the tax cuts and hydro subsidies.
His answer shows the measures are not just about helping the economy recover from COVID-19. It echoes messages Ford repeated often throughout 2018 and 2019, before anyone had even heard of the novel coronavirus, when he accused the previous Liberal government of driving Ontario’s economy into the ground, despite a decade of steady economic growth.
The debate about whether such tax concessions to business actually spur economic activity or starve government of revenue for programs is a long-running one, with the same kind of ideological divide as the debate over whether raising the minimum wage is a drag or a boost to the economy.
“The government’s focus on lowering profit-insensitive taxes like the employer health tax and business education tax is a helpful approach to recovery as small business revenues remain low, and frees up cash for small businesses to spend on other priorities,” said Ryan Mallough, director of provincial affairs for the Canadian Federation of Independent Business, a lobby group for small businesses.
“A future hydro cut or tax cut won’t help a boarded up business, and it certainly won’t help the folks who used to work there,” NDP Leader Andrea Horwath said during her budget day news conference.
“The budget is not pro-small business,” said Liberal Leader Steven Del Duca in a statement. “We’ve been calling on this government for months to immediately invest in Ontario’s economic recovery, all the while Ontario businesses have been left waiting.”
The government announced a $300-million fund last month for businesses affected by the “modified Stage 2” closures imposed on Toronto, Ottawa, Peel and York. Businesses will also be eligible to apply for that fund if they’re in regions placed under red-zone restrictions in Ontario’s new COVID-19 framework.
The hydro rate cut in the budget applies only to large industrial and commercial users of electricity, such as factories, mines or lumber mills.
“Reducing commercial and industrial electricity rates will make Ontario businesses more competitive and enable them to invest in recovery and growth,” said Rocco Rossi, president of the Ontario Chamber of Commerce, in a statement.
Whereas to Keith Brooks, programs director for Environmental Defence, the hydro rate cut “looks like a subsidy to big business at the expense of average Ontarians.”
Ford and the Progressive Conservatives are linking the hydro rate cut to the green energy programs brought in by previous Liberal governments. The PCs blame those wind and solar power projects for driving up electricity prices, although there’s conflicting evidence about how much blame green energy should actually shoulder.
“This electricity cost relief would free up money that could be better spent creating jobs,” said the government’s budget day news release.
There’s no question jobs are desperately needed for the economy to recover from the effects of COVID-19.
The latest unemployment report from Statistics Canada on Friday shows Ontario has added nearly 870,000 jobs since June. That’s still roughly 290,000 jobs short of the provincial employment level before the pandemic’s first wave and lockdowns.