Is productivity killing us? – Death by a thousand Tax cuts

Paul Martin continues to build his legacy as Corporate Canada’s best friend. After years of cutting corporate taxes as Finance Minister, Martin’s government is poised to once again favour corporations over workers and the environment.

New revisions to the Tax Act proposed for the upcoming budget will allow corporations to write off computers, heavy machinery and other capital investments over a shorter period of time. According to the Globe & Mail these proposed changes – long sought by corporate leaders – would lower corporate taxes by hundreds of millions of dollars.

Martin’s proposed changes will also have profound impacts on the future of many rural communities. Those living in communities dominated by the previously labour-intensive logging, mining, agricultural and fossil-fuel industries should be particularly worried, as these tax cuts will make even more workers expendable.

The proposed changes would benefit corporations by permitting them to write-off machinery and equipment in 4 years that now takes six. By reducing the cost of machinery, computers and other new technologies, Martin’s proposed tax incentives encourage companies to replace their workforce with new machinery that can be written off faster.

The trend is not unique to Canada. Jobs are being lost to automation all over the world. As Jeremy Rifkin points out, over 200 million people have become unemployed or underemployed since 1995.

Despite increases in productivity worldwide, thesenumber confirm that in our era of near-automated manufacturing, increasing productivity through automation and mechanization inevitably costs jobs. The machinery these tax cuts subsidize means mills will only require a fraction of the workforce required by the plants they replace.

While the nuances of depreciation tables are indecipherable to most Canadians, the impacts of automation are evident in communities being devastated by mill closures.

By changing the tax depreciation tables to provide further incentives to Corporate Canada to promote mechanization over jobs, Martin is once again accepting the dubious neo-conservative dogma that “stimulating productivity” by reducing corporate taxes will somehow benefit average Canadians.

Since tax policies reward and punish behavior, the question should be do we want to promote worker-less resource industries that consume public resources more efficiently? And if so, at what cost?

Subsidizing the conversion to highly mechanized production will have profound effects on rural communities. For example, Canfor’s new supermill in Houston will consume much of the wood previously flowing through smaller mills throughout the region, while reportedly employing 45 fewer workers–and three more supermills are planned for the north.

Since the low-value, high-volume Houston supermill will be fueled with logs taken from tenures over public forests, one can’t help but question whether this improved productivity benefits the public interest.

Certainly as smaller mills are shut down to supply supermills, workers throughout the region will be worse off. There will be significantly fewer jobs manufacturing our public logs.

While the media continue to pray at the productivity alter, the environmental consequences of “boosting productivity” are seldom discussed. The increased production of these supermills raises serious concerns about ongoing over cutting. Canada’s trees simply do not grow fast enough to compete against foreign competitors growing trees in 8 to 12 years.

Promoting low-value, high-volume production through a variety of tax subsidies simply doesn’t make sense. Particularly for industries like logging and mining where corporations acquired tenure for virtually nothing and which now propose to abandon obligations to create jobs in local communities.

If we are to subsidize, through tax reforms, new technologies which lead to higher productivity the benefits from that productivity should be shared with workers and communities. This can be done by reducing the hours worked without reducing pay or the number of workers. This would maintain local employment and economies instead of sending all the benefits of technological change to corporate headquarters for multimillion dollar salaries for CEOs.

The traditional arguments for tenure – stumpage and jobs – no longer hold water. The BC government’s new so-called market-based pricing stumpage system is expected to lower the prices paid by corporate tenure holders for publicly-owned logs. With lower stumpage paid and fewer jobs, perhaps it time to question whether logging tenures provide a fair return to British Columbians.

While pundits complain that Canada’s depreciation rules are less generous than those in the United States, they overlook that fact that the highly-productive U.S. economy is plagued by an unprecedented jobless recovery or that the gap between rich and poor has increased to point that it now resembles the disparity in the 1920’s right before the Crash. Is this something we want to emulate?

As with all tax policies, depreciation rules need to be a part of a larger debate about the kind of behaviors we want to encourage, and those we want to deter. Consideration of social, environmental and economic impacts needs to be addressed.

Unfortunately, our corporate friendly politicians egged on by our Dow-driven press, continue to believe that benefits given to corporations will trickle-down to communities and workers. History shows they are misguided.

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