HAUBRIC: Businesses need tax breaks, not handouts from taxpayers

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Premier Wab Kinew is taking money from taxpayers and giving it to corporations across the province. This is bad for taxpayers.

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This is bad for taxpayers because corporate welfare is expensive, picks winners and losers in the economy, and doesn’t work the way politicians like to promise.

Kinew recently announced a range of different corporate philanthropic benefits.

The government has announced $23.4 million for a Winnipeg bus company to build a new plant to produce low-emission buses. The Manitoba government and federal agencies also teamed up to give the aircraft repair company more than $500,000 to train employees. The government also increased donations to the Manitoba Minerals Development Fund by $2 million and spent about $600,000 to help a number of companies over the past two months.

These recent handouts are just more of the same. The government has announced it will create a so-called $50 million Strategic Innovation Fund to allocate more money to corporations in the 2024 budget.

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The government likes to claim that these handouts are needed as investments that will help the economy and create jobs, but such claims do not stand up to a second glance.

Take, for example, a handout from the NFI bus company. The government press release highlights that “demand for zero-emission transit buses in major NFI markets is at record levels.” If this is the case, then it just makes sense for the company to start producing more of these buses, which begs the question: why does the government need to hand over all this taxpayer money?

The short answer is no.

If the investment makes business sense, any smart business will make the investment themselves. If a company won’t do something without millions of dollars from the government, it’s not a good decision to begin with.

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Of course, businesses will take any money they are offered, but that doesn’t mean it will help the economy as a whole.

Economic research shows that there is no statistically significant evidence that corporate welfare increases economic growth. Research also shows that companies with low productivity are more likely to receive subsidies than productive ones.

So while a check from the government may help a particular company and its executives fill their coffers, it certainly won’t help ordinary Manitobans.

Instead, the government should stop spending money on corporate welfare and use it to provide tax breaks to all businesses. Tax cuts help every single industry, making the entire province more competitive, not just the individual businesses lucky or politically connected enough to receive handouts.

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From 2011 to 2021, the Manitoba government spent $5.8 billion on corporate welfare, according to the Fraser Institute. That’s an average of $522 million spent on subsidies each year. That’s more than half of what the government expects to collect in business taxes this year.

Instead of using more than half the money the government collects each year in business taxes on corporate philanthropy, the government should lower business taxes to make all businesses in Manitoba more competitive.

And competitiveness matters because Manitoba businesses are currently losing out when it comes to taxes. In Manitoba, business income tax is 12%. That’s the same as Saskatchewan and British Columbia, but half a percentage point higher than Ontario and four percentage points higher than Alberta’s 8% rate.

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A complete shift away from corporate welfare would allow the government to cut the business tax rate by roughly half, from 12% to 6%. This would give Manitoba the lowest business tax rate in the country (by two percentage points). This would actually help all Manitoba businesses grow and create jobs, as well as encourage new businesses to move and locate in the province.

Kinew needs to move away from corporate welfare in Manitoba. Businesses grow and prosper when taxes are low, not when they receive one-time handouts from non-working taxpayers.

— Gage Haubrich is the Prairie Director of the Canadian Taxpayers Federation.

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