The recent announcement by B.C.’s New Democrats that, if elected, they’d up the provincial film tax credit for labour costs (to 40% from the existing 35%) is another example of how some parties close to organized labour, and labour leaders themselves, have a bizarrely contradictory attitude toward business
On the one hand, those who are not exactly fans of wealth creation can’t wait to impose higher taxes on business – witness the NDP plan to hike taxes beyond even the BC Liberals’ actions in the last provincial budget.
But conversely, such politicians with the full support of organized labour also love to hand out taxpayer cash to their favourite businesses or sectors.
On the NDP’s proposal itself, opposition leader Adrian Dix argued his party’s proposed change would cost the provincial treasury $45 million but (somehow) return $93 million in revenue to the province.
The promised fiscal return on the upped film tax credit is fanciful.
As I’ve written elsewhere, if Dix really believes in such math he should propose a $450 million tax credit boost on the theory it would return $930 million to the province. But the errant claims are in line with the nonsensical and mathematically challenged boosterism that regularly emanates from the film industry and other corporate welfare recipients.
Such special deals on taxes for film are expensive. In the last budget year, existing tax credits for the film industry cost the province $331 million (or $437 million actually, if you include adjustments to the cost of such tax credits in past years but booked in the most recent year).
On a more individual level, consider the subsidy in this context: Simon Fraser University’s Rhys Kesselman has calculated that B.C.’s subsidies amount to a taxpayer cost of $125,000 per film job.
The inanity on film subsidies is widespread. In 2008, Louisiana taxpayers financed more than $27 million worth of incentives for a Brad Pitt film. More generally, south of the border, the Washington, D.C.-based Tax Foundation found that the cost of film tax credits among the various American states jumped to $1.4 billion last year from a modest $4 million in 1999.
Lest the film industry apologists wonder why I attack tax credits, which have the effect of lowering tax payable, here’s my response in advance. First, many of the credits available from various governments are refundable.
So companies not only lower their existing tax burden but also receive a cheque from the public treasury in addition. That money comes from other taxpayers who might prefer governments do something else with such cash or not take it in the first place.
Second, lower and moderate overall taxes for people and businesses make sense for reasons of incentives, efficiency and economic growth. But it makes no sense to cherry-pick this or that business or sector and give it an advantage over other wealth creators. Such arbitrary picking of tax winners and losers through political favouritism is crony capitalism in its most obvious and awful form.
It would be nice if the film industry were the only example of such favouritism, but it’s not. Federally, the Stephen Harper government continues to lavishly subsidize the aerospace and automotive sectors with large dollops of taxpayer dollars.
Pathetically, the Harper government is backed up by labour leaders. To note just one example, the Canadian Autoworkers Union and its friends at the Canadian Labour Congress have never met a corporate welfare subsidy they don’t like so long as some union job, somewhere, is involved.
Nicole Gelinas from the Manhattan Institute had a recent useful idea: Let’s update the late Margaret Thatcher’s disdain for taxpayer subsidies to those addicted to state help and apply it to even more sectors.
Gelinas pointed out that back in the 1980s, Thatcher took on the biggest recipients of corporate welfare in her tenure as prime minister: money-losing coalmines that drained taxpayer wallets through state subsidies.
Today, governments in Great Britain and elsewhere coddle the financial sector and other industries instead of making tough choices that would be best for the long-term health of the economy and taxpayers.
Ditto for Canada and our film sector and its lavish subsidies dressed up in tax credit drag. You’d think that union leaders who, unlike most union members, preach anti-business and anti-capitalist rhetoric, would at least have the consistency to oppose corporate welfare in all its disreputable forms.
But no such opposition to crony capitalism exists among this country’s labour elite. Instead, too many union leaders are just rent-seeking subsidy-seekers, exactly like some of the CEOs that in other contexts, they’re deliriously happy to criticize. •
