The Drummond Report

TheNewTeddy · February 16, 2012

Can you then prove to me that Ontario's economy, compared to Canada as a whole, has made a radical change that would more than make up for my cutting the figure in half?

Smallc · February 16, 2012

Your optimism cheers me immensely.

And where is that growth going to come from in Ontario?

From Ontario's extremely diverse economy. It isn't that difficult. Ontario isn't all manufacturing.

TheNewTeddy · February 16, 2012

Business is where it's at. How many large companies have Canadian HQ's outside of Toronto?

Boges · February 16, 2012

Business is where it's at. How many large companies have Canadian HQ's outside of GTA?

FTFY

TheNewTeddy · February 16, 2012

FTFY

Perhaps I should have said "Markham and/or Vaughan"

Boges · February 16, 2012

Perhaps I should have said "Markham and/or Vaughan"

Mississauga is the big one.

capricorn · February 16, 2012

Damn impeachment comes to mind, or jail terms for impersonating a government!

Impersonators is a great describer of this bunch of two-faced Liberals.

Doesn't Ontario have a finance minister with leagues of high paid financial bureaucrats at his beck and call? Absolutely. So why outsource what could and should have been done in-house? There's only one possible answer. It's a ploy to deflect blame onto Drummond for forcing us to tighten our belts while they maintain their pet projects designed to continue receiving the votes of interest groups. What a despicable, underhanded and dishonest way to run a government.

Smallc · February 16, 2012

i'm pretty sure you're wrong on that. Having Drummond do the report gives the government cover to make the difficult choices.

PIK · February 16, 2012

We need another mike harris. When will you libs learn. It seems all the lib MP's sent out over the airways today seem to be saying everything is alright. And it also seems that they just opened the bank book and NOW realized we are broke.

Edited February 16, 2012 by PIK

Boges · February 16, 2012

Impersonators is a great describer of this bunch of two-faced Liberals.

Doesn't Ontario have a finance minister with leagues of high paid financial bureaucrats at his beck and call? Absolutely. So why outsource what could and should have been done in-house? There's only one possible answer. It's a ploy to deflect blame onto Drummond for forcing us to tighten our belts while they maintain their pet projects designed to continue receiving the votes of interest groups. What a despicable, underhanded and dishonest way to run a government.

The Toronto Mayor paid an accounting firm to do something similar. I wouldn't trust a bureaucrat to find savings in anything.

Argus · February 16, 2012

Still, Ontario's debt is relatively low at current.

Relative to Who? Greece?

Argus · February 16, 2012

We need another mike harris. When will you libs learn. It seems all the lib MP's sent out over the airways today seem to be saying everything is alright. And it also seems that they just opened the bank book and NOW realized we are broke.

There was a column today, by I forget whom, where they stated that for all the squealing that went on when Harris took over, he only wound up cutting spending by 4%. That's all that was needed to get the budget to balance, even with his tax cuts. But now, thanks to McGuinty, a new government will have to cut by 16% - FOUR TIMES MORE than Harris had to.

Makes you look back fondly on the sound fiscal management of Bob Rae...

capricorn · February 16, 2012

I wouldn't trust a bureaucrat to find savings in anything.

You make an excellent point. I suppose what I'm looking for is a government that takes responsibility for managing the public purse responsibly and doesn't play games with taxpayer money. What riles me is McGuinty's deflection of these responsibilities and all the waste that occurred under his administration.

Boges · February 16, 2012

I actually looked it up.

Alberta only has a deficit of $3.8 billion. New York State has a smaller deficit ($11 million) with a much higher population and California who has more people than all of Canada has a deficit of only around $13 billion.

So yeah Ontario is pretty fuct.

Edited February 16, 2012 by Boges

Smallc · February 16, 2012

Relative to Who? Greece?

To most of the western world. Even under a worse case scenario, in 2020, it won't reach critical levels.

Smallc · February 16, 2012

I actually looked it up.

Alberta only has a deficit of $3.8 billion. New York State has a smaller deficit ($11 million) with a much higher population and California who has more people than all of Canada has a deficit of only around $13 billion.

So yeah Ontario is pretty fuct.

US states and Canadian provinces can't be compared in that way. US states can't carry debt. Ontario still has a relatively high credit rating. If austerity is implemented, Ontario will be just fine.

capricorn · February 16, 2012

And it also seems that they just opened the bank book and NOW realized we are broke.

This reminds me. Not too long ago, McGuinty gifted us with a 10% rebate on our electricity bills to shut up the complainers that hydro cost too much. Now I see Drummond recommends rolling back the rebate. Can't wait to see how Dalton dances around this one.

Boges · February 16, 2012

This reminds me. Not too long ago, McGuinty gifted us with a 10% rebate on our electricity bills to shut up the complainers that hydro cost too much. Now I see Drummond recommends rolling back the rebate. Can't wait to see how Dalton dances around this one.

He also recommended ending the seemingly endless debt-retirement charge. I wonder if McDalton would do that?

I started a thread months ago claiming the Ontario Clean Air Energy Benefit was just an expensive bribe.

And with the constant uptick in energy prices, those savings aren't even really noticed anymore.

Edited February 16, 2012 by Boges

Michael Hardner · February 16, 2012

Relative to Who? Greece?

35%

Seems to be lower then G8 countries, right?

Michael Hardner · February 16, 2012

You make an excellent point. I suppose what I'm looking for is a government that takes responsibility for managing the public purse responsibly and doesn't play games with taxpayer money. What riles me is McGuinty's deflection of these responsibilities and all the waste that occurred under his administration.

It shouldn't rile you.

It shouldn't surprise you.

These people aren't managers, they're lawyers who got into politics. Why should we be surprised when a lawyer ends up running an organization that spends tens of billions and can't do it well ?

Responsible management is needed. If not, then open up the books to the public and let us see what is being spent.

capricorn · February 16, 2012

It shouldn't rile you.

It shouldn't surprise you.

I know. I'm feeling particularly emotional and upset about the situation we find ourselves in. And I just can't see McGuinty and company turning things around.

CPCFTW · February 17, 2012

They should do most of the above and raise corporate taxes by 5%.

Take a look at this infographic to see why:

http://nationalpostnews.files.wordpress.com/2012/02/drummondreport3.jpg

I don't see why from that infographic. Corporate taxes are 8.9B, and the budgetary shortfall is 15B. Best case scenario, higher corporate taxes will have no negative effect on other revenue, and 0.05 x $8.9B of additional revenue is generated. This is approximately $450 million, or 3% of the shortfall (remember this is best case and very unlikely).

Corporations effectively don't pay taxes anyway. They pass it on to the consumer and employees. Raising corporate taxes would just mean more layoffs, higher prices, less personal income tax revenue, and lower returns on financial investment (ie. further encouraging consumption over saving).

Take a look at an income statement, and you'll note that net income is a line item net of taxes. This means that the residual income after taxes is distributed to shareholders or reinvested in the company (more employees, capital, other economic activity).

Lets take a look at CAT's income statement:

http://ca.finance.yahoo.com/q/is?s=CAT&annual

As you can see, in 2010, CAT paid $968M in income taxes on profits and had a net income of 2.7B after taxes. What if CAT had 0% income taxes? CAT would have an additional $968M to distribute to shareholders (into RRSP, 401K, pension funds, mutual funds, etc.), or to create more jobs/economic activity. Furthermore, higher corporate profits would encourage competitors to enter industries and thereby lower prices.

Blaming corporations is so passé. What really needs to be done is to continue to reduce corporate taxes (but increase taxes on profits which are repatriated out of Canada). This will encourage companies to invest in Canada and to keep investing its profits in Canada.

Other than cutting services, budgetary shortfalls should be covered through personal and sales taxes. Presuming that 0% corporate taxes would lead to lower prices, sales taxes could be increased without significantly impacting consumers. Lower corporate taxes will also lead to higher income tax revenue from the "1%". Since corporations will have more profits to distribute to shareholders, the 1% who own so many financial assets will be taxed more.

Reducing corporate taxes to 0% would be one scenario where I would support the Occupy movement's call to increase taxation of 1%ers. Increasing dividend taxes would lead investors to demand that corporations focus on capital gains (ie. growth/reinvestment). For example, BMO has 640M shares which paid $2.80 in dividends in 2011. That is $1.8B from one company that was returned to shareholders rather than re-invested in the economy.

However, the economic justification for favourable dividend taxation is that it allows investors (aka the market) to more effectively allocate capital in the most economically profitable way (ie. theoretically companies should pay dividends if they cannot invest in capital projects which offer a greater ROE than other investment opportunities). Therefore, capital gains taxes should also be increased such that dividends still remain favoured by investors.

If reduced corporate taxes are not palatable to the public, then corporate tax credits which can reduce effective corporate tax to 0% should be offered for job creation.

I would think that increased dividend and capital gains taxes would help curb some of the public outrage over 0% corporate taxes.

More should be done to encourage Canadians to invest rather than consume. The TFSA is a good start. Higher investment returns would also help.

Economy fixed.

Edited February 17, 2012 by CPCFTW

CPCFTW · February 17, 2012

And to add: that infographic is a great tool to show that private enterprise is the source of all revenue.

Public services and employees cannot exist without private sector employees' income tax revenue.

Lets say you have an economy with 100 people and want to start a government which will build a school. You will hire 1 education minister, and 5 construction workers, and 5 teachers. Now how do you pay them and pay for building supplies?

You need the other 89 people in the economy to be generating income privately. Then you can tax them for revenue, and use that revenue to pay for expenses like the aforementioned school and employees' labour. Yes the public employees (minister, construction workers, teachers) will be paying income taxes as well, but their incomes are entirely dependent on the 89 people working in the private sector.

I had to add this because I am sick of people claiming that public service employees contribute to the economy equally because they also pay taxes. The only legitimate argument that can be made is that public services such as defense, transportation, education, and health care allow the private sector to function. But I think it is obvious that overspending on these services is not a sustainable path.

Public service employment should be limited to a certain percentage of the economy because of the necessity of the private sector to fund the public sector. It would be up to governments/public to allocate that percentage of employees to the services which it most values.

Edited February 17, 2012 by CPCFTW

mentalfloss · February 17, 2012

This is approximately $450 million, or 3% of the shortfall (remember this is best case and very unlikely).

Right.

That's why I said, in addition to. And the rate should be raised by 10% as that would create a $1 Billion bonus every year.

Also, keep in mind, that there is no evidence to support that a change in corporate taxes will actually have any significant effect on consumers. Companies will still make a profit.

G&M is getting on board with the program:

Governments, especially the McGuinty government, refused to tell the truth to the electorate. They kept assuming, and hoping, that the robust economic times of yesteryear would return. And they did two things simultaneously: They refused to raise taxes, and they kept on adding new spending programs or letting existing ones expand. In the last election campaign, none of the parties came remotely close to levelling with the voters.

Ontario can no longer hide from taxes, restraint

Edited February 17, 2012 by mentalfloss

CPCFTW · February 17, 2012

Right.

That's why I said, in addition to. And the rate should be raised by 10% as that would create a $1 Billion bonus every year.

Also, keep in mind, that there is no evidence to support that a change in corporate taxes will actually have any significant effect on consumers. Companies will still make a profit.

G&M is getting on board with the program:

Governments, especially the McGuinty government, refused to tell the truth to the electorate. They kept assuming, and hoping, that the robust economic times of yesteryear would return. And they did two things simultaneously: They refused to raise taxes, and they kept on adding new spending programs or letting existing ones expand. In the last election campaign, none of the parties came remotely close to levelling with the voters.

Ontario can no longer hide from taxes, restraint

Who cares what a guy with a journalism degree from g&m thinks? Do you form your opinions on what uninformed journalists tell you?

Edited February 17, 2012 by CPCFTW