Daniel McHardie
In St. John’s, NL

ST. JOHN’s, NL – Before Prime Minister Stephen Harper starts doling out fistfuls of federal cash for equalization or social transfer payments to remedy the fiscal imbalance, he should implement sweeping tax cuts, according to British Columbia Premier Gordon Campbell.

The B.C. premier admitted his proposal isn’t receiving unanimous support among his colleagues who are in St. John’s this week discussing ideas to fix the fiscal imbalance. Increasing the amount of money transferred to the provinces to deliver social programs should be a part of any agreement but Campbell said his first priority is broad-based tax cuts.

“This is about a comprehensive human resource strategy. We want to keep Canadians here, retain the skills and the talents that we have in Canada. We want to be an attractive place for people to come and to contribute to building this country over time,” Campbell said.

“That is one of the benefits a broad national tax cut would have. I think clearly when you leave more money in peoples’ pocket they decide for themselves where they want to invest, which is in itself not a bad thing.”

Campbell has a reputation as a tax-cutter. The two-term B.C. premier slashed taxes in his province by 25 per cent or $1.5 billion on his first day in office.

On many issues, New Brunswick Premier Bernard Lord is a kindred spirit to Campbell but in this case the two are at odds. Lord said he favours lower taxes, however just cutting federal taxes does not cure the systemic problems plaguing the provinces.

“I don’t think it will fix the fiscal imbalance because I don’t think broad-based tax cuts will fix the issues of a broken equalization program,” Lord said.

Provinces would have the option, if the federal government reduced its tax burden, to move into that space and continue collecting those taxes. The so-called fiscal imbalance is the idea that Ottawa is reaping massive surpluses that it does not need while the provinces are struggling to pay for its constitutionally-mandated social services.

Brian Lee Crowley, president of the Atlantic Institute of Market Studies, said the constitution gives the provinces taxing powers and if they don’t have the money to cover their payments, they can always raise taxes. But, he said, if those provinces want to increase their taxes, they would have to justify that to their electorate.

British Columbia’s premier said if Ottawa followed through with the federal tax cuts, he would not move into that space by raising taxes.

Crowley said he fully supports Campbell’s call for national tax cuts. Any fiscal imbalance, he argues, should be addressed by relieving the tax burden faced by Canadians.

“If there is a fiscal imbalance, it is not between Ottawa and the provinces, it is between Ottawa and federal taxpayers,” Crowley said. “That money should be returned to the people it was taken from. The provinces have no claim to that money.”