The system looks good on paper; dig a little deeper, however, and the flaws become apparent
Prime Minister Justin Trudeau and Deputy Prime Minister and Minister of Finance Chrystia Freeland arrive to deliver the federal budget in the House of Commons on Parliament Hill in Ottawa, on March 28, 2023. John Lester is a fellow-in-residence at the C.D. Howe Institute and an executive fellow at the University of Calgary’s School of Public Policy.
Dig a little deeper, however, and the flaws become apparent. The first is incomplete coverage of spending. Governments use the tax system to achieve economic and social objectives, making these initiatives functionally equivalent to spending programs – think of the tax incentives given to electric-vehicle battery manufacturers and the Goods and Services Tax credit available to Canadians with low incomes, particularly when used to deliver a grocery rebate.
The real question is whether Canadians overall are richer or poorer because of the business subsidy. In a labour-short economy, government subsidies simply move workers from one industry to another. This shift will only raise the real income of Canadians if workers are more productive in the subsidized industry than in another industry by a margin large enough to offset the cost of providing the subsidy.
The subsidy for Volkswagen was sold as paying for itself over five years, apparently through tax revenues generated directly and indirectly by the project. This is problematic because of the absence of any details on the calculation and because even the best break-even calculation is not a reasonable basis for making a decision. A basic point is that workers in the battery plants would have been employed elsewhere, so a break-even analysis is inherently misleading.
Subsidy Government Analysis Industry Program Cost Programs Volkswagen AG Volkswagen John Lester
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Federal Court: Biden Must Spend Border Wall Construction Funds On Border Wall Construction'President Biden, via proclamation, paused obligation of these funds the day he was inaugurated....' Court rules this was illegal, but I think Biden will find a way not to actually build the wall.
Read more »
Canadians open up about what they spend on groceries every weekDoes the amount of money you spend on groceries every week send you into a panic? Turns out, you're not alone. A recent post in the r/AskACanadian ...
Read more »
Retailer Harry Rosen to spend $50 million on overhaul over next five yearsTORONTO — Luxury menswear retailer Harry Rosen says it will invest $50 million over the next five years to relocate its flagship store and transform several others.
Read more »
Canadian renters spend more of their income on housing costs compared with homeowners: RBC economistRenters face daunting barriers in their attempts to build wealth as they're forced to devote an increasing share of their income to keeping a roof over their head, said an RBC report out Thursday.
Read more »
Most Canadians want Trudeau government to spend less, poll saysA majority of Canadians want Prime Minister Justin Trudeau to reduce government spending, which many see as one of the primary drivers of inflation in recent years, a new survey finds.
Read more »
Ikea Plans to Spend $327 Million in SKorea to Win Market ShareSwedish furniture maker Ikea plans to spend about 300 million euros ($327 million) in South Korea over the next three years to increase market share in the Asian country.
Read more »