In the March 14 edition of the VMS Wayne Fowler responded to my commentary on Canada’s inflation propelled by excessive government spending. He suggests that I “get much of the causes wrong” and goes on to say that the answer to the country’s inflation woes is to “put a windfall tax on corporations to remove added money.”
I will first say that my comments were backed by statistics and facts appended to my commentary. I wish he had done the same. I will acknowledge that Canada was not alone in suffering the effects of inflation and that yes other forces also contributed. I should have clarified that my central point was that our economic challenges were exacerbated by undisciplined government spending.
That said I am struggling to understand a central tenet of Mr. Fowler’s commentary; specifically “reduced government spending (austerity) has been shown to increase national debts.” He would do well to educate us all on this point. How reduced spending leads to deficits/debt defies imagination.
He further suggests that a remedy would see government(s) instituting a new tax imposed on companies when profits exceed a certain level. This would be in addition to corporate income taxes which, by definition, are levied when a company is profitable. Would he care to suggest how this would function? What are ‘excessive profits?' Should a sawmill, having survived a period of low lumber prices and/or sales, now suddenly pay an additional tax when one year the company posts strong financial results? How about a farmer (yes many farmers are incorporated) going through the same with falling then rising grain/cattle prices? Assuming ‘what’s good for the goose is good for the gander’ would he likewise suggest compensating those companies when earnings are low or should we look the other way and assume that those who invest in these companies should just absorb that risk? In suggesting this I wonder if Mr. Fowler is aware that Canadians’ pensions and RSPs are significantly invested in companies whose stock valuations and dividends would be impaired by another tax.
If we want to drive out competition and push consumer prices still higher than a windfall profit tax scheme is the way to do it. A sure way to further reduce investment in our country is for governments to announce new measures to curb investor returns. I say further reduce because last year foreign investors purchased $32-billion of Canadian securities, the least in 16 years. During the same time a record $48.7-billion in Canadian equities were sold off by foreign buyers (https://www.theglobeandmail.com/investing/investment-ideas/article-more-economists-are-getting-deeply-worried-about-canadas-future-and/).
A couple final comments before closing. My comments did not single out CERB as Mr. Fowler would have readers believe. I mentioned CERB as one of many of taxpayer funded cash handouts from governments. My point remains that pennies don’t fall from heaven and it will now be future generations who shoulder this burden. I also think his comment about record corporate profits in Canada needs to be tempered. While corporate financial performance did generally rebound after a period of pent up COVID related demand, it’s also worth pointing out that corporate bankruptcies have surged the most in 36 years in 2023 (https://financialpost.com/news/bankruptcies-soaring-especially-canada).
I will close just as Mr. Fowler did. “Let’s look at the real issues. Then we can see the real solutions.”
Ken Topolinsky
