POLITICS OF RESENTMENT – February 3, 2011

FRANK GRAVES DISCUSSES THE ISSUE OF CORPORATE TAX CUTS

[Ottawa – February 3, 2011] – There has been a lot of debate on the issue of the corporate tax cuts lately. Frankly, I find the government’s approach on this quite puzzling. Putting aside the very mixed economic literature on the benefits/costs of corporate tax cuts as a boon to job creation, the public opinion research is remarkably consistent. Corporate tax cuts, when position against virtually all of the plausible alternatives (e.g. individual tax cuts, investment in health and education, even deficit reduction) consistently emerges as a clear loser in the court of public opinion. We have looked at this issue for many years and I can’t recall a single test where corporate tax cuts emerged as a public opinion “winner”. Outside of the context of an election or pre-election campaign, we have found evidence that corporate tax cuts can be “sold” by embedding them in a broader productivity agenda, but this is not that kind of situation. So it seems quite confusing to me why the government would want to lead with its chin on this issue. It doesn’t even strike me as consistent with its overall successful positioning of the Conservative brand as the party for the average Canadian, the “Main Street not Bay Street” party.

The sell is exacerbated by the fact that we are coming out of a global economic crisis that was seen by most as authored largely by the corporate sector. The problem is compounded by the large deficit which makes it an even more challenging sell. Finally, there is rising evidence of growing concerns with inequality, an issue which has been surprisingly dormant for the past decade as income and wealth stratification have burgeoned.

So the Government is rarely this politically opaque and perhaps they have other objectives in mind. Perhaps they wish this to be seen as a statement of economic principle and courage, which flies in the face of the popular but wrongheaded public opinion. Alternatively, they may be considering embedding the tax cuts into a longer term productively or prosperity agenda, where it may be judged more favourably. Also, if the Government can link this to small and medium sized businesses, they have much more fertile ground as the public are much more favourably disposed there. The more Machiavellian view is that they use this lob ball to entice the opposition into an election where they don’t appear to be in a winning position and then try to low bridge or perhaps even shift ground on this once the writ is dropped. We know that this can be an important issue for voters but it is unlikely to be the ultimate ballot issue for most.

These are my sense of the challenges and possible strategies available for the Conservatives. For the opposition I think this has strong surface appeal but the real payoff, in terms of emotional resonance and hence votes, is to translate this from impersonal corporate benefits to public largesse to the avaricious private jet wielding business elites it becomes more powerful, particularly as average wages have stagnated while the fortunes of those at the top have taken off over the last decade. It was Nietzsche who noted that resentment is the fuel of modern civilisation and that aphorism extends to politics.

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