McGuinty and McCallum don't get it
National Affairs
Claire Hoy
Dalton McGuinty and John McCallum just don't get it. Rather than dealing with the truth of the tough criticism of Ontario's economic decisions from federal Finance Minister Jim Flaherty, McGuinty, our premier, and McCallum, the federal Liberal's finance critic, are both sharing a political crying towel.

Referring to Flaherty's consistent - and deadly accurate - complaint that Ontario's high corporate taxes are discouraging new investment in the province, McCallum said, "He's (Flaherty) trashing Ontario. I just can't believe it."

As for McGuinty, who, like Toronto's Mayor David Miller has become a serial whiner - no amount of money from anywhere is ever enough for those two - has fired a letter off to Prime Minister Stephen Harper which, typically, doesn't address Flaherty's argument but instead cries about the fact that the federal finance minister, an Ontarian himself, is making it.

"The very last thing Ontario families and businesses need is for ...(Flaherty) to actively seek to undermine confidence in the Ontario economy," wrote McGuinty, adding that Flaherty's "extraordinary attack on Ontario is a betrayal of the federal government's responsibility to champion the Canadian economy, both at home and abroad."

McGuinty and McCallum were upset that Flaherty, a former Ontario finance minister, in again repeating his argument that Ontario's exceptionally high corporate tax rates are scaring away business, said on the weekend that the fact McGuinty won't reduce taxes "discourages investment in ...Ontario... If you're going to make a new business investment in Canada, and you're concerned about taxes, the last place you will go is the province of Ontario."

Sadly, it's true. And as much as McGuinty, McCallum, and the Liberals in general don't want to hear it, if anybody is betraying Ontario, it's the McGuinty government's hardheaded refusal to create a level playing field in Ontario when it comes to new business investment.

It's the old story. When somebody says something that is dead on but is something you don't want to hear - particularly when it's something you could fix if you wanted to - the natural instinct is to lash out at the messenger rather than acknowledge the validity of the message.

McGuinty can cry all he wants about Flaherty criticizing the province, but even Toronto Dominion Bank chief economist Don Drummond, a politically neutral source, was quoted last week in the Toronto Star (hardly a bastion of Conservative politics) as saying that Ontario's business tax rates "stick out like a sore thumb" compared to the rest of Canada. He added that if current trends continue then by 2012, Ontario's overall tax rate on new businesses will be 30.17 per cent, compared to 18.8 per cent in Quebec.

Indeed, in his remarks, Flaherty, who has challenged provinces to reduce their business tax rates to 10 per cent by 2012, the federal finance minister praised British Columbia, another Liberal government, for recently pledging to lower corporate taxes to 10 per cent. Also, Alberta is already at that level.

Unlike Alberta, say, which happily has oil, Ontario must rely on its manufacturing sector which, all by itself, accounts for about 20 per cent of Ontario's total economy. Yet Ontario has lost 200,000 manufacturing jobs under McGuinty's watch since 2004.

To be fair, it's not all McGuinty's fault, obviously. The U.S. slowdown and higher oil prices have certainly contributed.

But - and this is all Flaherty is saying - is you want to attract new manufacturing jobs - and presumably McGuinty does - you're not going to do it when you boast by far the highest tax rates in the country.

As yourself this question: if you were a manufacturer looking for a place to invest in new plants and equipment, wouldn't you look at the tax rates? Yes, taxes aren't the entire story when it comes to investment, but they're a major part of decision making, particularly since nearby provinces with much lower taxes can offer all the other advantages that Ontario offers, such as accessibility to markets and a constant supply of welltrained labor, etc.

Despite this obvious reality, however, McGuinty - who, as history shows, is quick to raise taxes (despite promises he wouldn't) - seems determined to keep Ontario's place as one of the most expensive jurisdictions to do business.

And for McGuinty to whine that Flaherty has no business criticizing Ontario - this from a premier who has not stopped criticizing Ottawa ever since the Tories took over - is the absolute height of egotistical folly to the detriment of Ontarians.

It's not Flaherty's legitimate criticisms which are "trashing" Ontario. It's McGuinty's stubborn refusal to act on what is a serious problem.