Making Canada Relevant Again- The Economic Super-Thread

[a_majoor]

In other words the Ontario taxpayer - via the health care system - is subsidizing Toyota to far greater extent than anything dreamed of in the Southern US. (Not to mention the continued currency differential).

Cheers, mdh

And that is really the name of the game, transfer costs and risks to the taxpayer whenever and however possible. Next time you see someone with a Toyota, you should demand they give you a lift in "your" car.

 

[Brad Sallows]

$8.50 / hour -> $17,680 /year.  And you claim the health care cost differential is $1,350.  If your numbers are correct, the myth the socialists have been promulgating that our vaunted health care system in large part won over Toyota has surely been destroyed.

 

[Jaxson]

brad surprisingly enough the most serious injury ive seen in the last 2.5 years of working at chrysler is dehydration other then that, a few cuts, scrapes and such of that matter...so really it is worth having our taxpayers pay for that instead of not getting all those extra jobs and such... and sorry guys i cant find that link but it was in the toronto sun between monday and thursday ... if that helps... :-\

 

[Zipper]

Here is an idea.

We recieved the contract and are building a new factory. Lets hope more come our way.

Be happy! ;D

 

[a_majoor]

Here is an idea.

We recieved the contract and are building a new factory. Lets hope more come our way.

Be happy! ;D

I'm sure that is exactly the response Dalton McGuinty and Mr Dithers are hoping for. Since not enough people are interested or willing to look at how corporations can get subsidized by the taxpayers (i.e. you and me), they don't equate the collossal tax bite (for many Canadians the single biggest household expense) with the new factory or similar announcements.

A check sum for this proposition is that the shareholders and management of a corporation like Toyota should favor placing the factory in a low tax environment like Alberta, but do not. Although there are lots of externalities which make this a difficult question to answer, there should still be a few eyes looking into the reasons for that.

 

[I_am_John_Galt]

Um, according to this article, Toyota chose Ontario because training costs (not wages or healthcare) outweighted the benefit of the subsidies:

Toyota to build 100,000 vehicles per year in Woodstock, Ont., starting 2008
06:40 PM EDT Jul 25

STEVE ERWIN

WOODSTOCK, Ont. (CP) - Ontario workers are well-trained.

That simple explanation was cited as a main reason why Toyota turned its back on hundreds of millions of dollars in subsidies offered from several American states in favour of building a second Ontario plant.

Industry experts say Ontarians are easier and cheaper to train - helping make it more cost-efficient to train workers when the new Woodstock plant opens in 2008, 40 kilometres away from its skilled workforce in Cambridge.

"The level of the workforce in general is so high that the training program you need for people, even for people who have not worked in a Toyota plant before, is minimal compared to what you have to go through in the southeastern United States," said Gerry Fedchun, president of the Automotive Parts Manufacturers' Association, whose members will see increased business with the new plant. ...

http://www.cbc.ca/cp/business/050630/b0630102.html

Of course a more cycnical take on it is that most of the skilled workers in the southern states already have jobs.  Of course the notion that we are benefitting merely by our proximity and access to the US economy doesn't make any sense at all ...

Ah but here is the kicker in my (actually alot of peoples that I agree with) idea. It would require a change in our constitution, but if it happened, it would allow municipalities to collect taxes off their population bases directly instead of having the federal or provincial levels doing so. Thus the money stays at the level that really needs it and you don't end up paying three levels of government before seeing your 10 cents on the dollar. Thus you not only download some of the responsibility from levels of government far removed from the issue, but you also have the money right there to use. 1 to 2 levels of bureaucracy instead of the x amount you have now, as well as shrinking all the useless ministries (if not getting rid of them entirely) above. Money more effectively spent on the level that needs it and able to cut taxes as well since your not filling the pockets of various inter-levels.

Its just getting those other levels of government to actually give up the taxes (power) in order to make it happen.

I recall reading in one of those "Tax Havens for Dummies"-type books that the Federal Government actually has no authority to collect income taxes.  The BNA Act (or whatever) explicitly gives the authority to collect income taxes to the Provincial Governments only, and moreover, that authority is not transferable.  I'm curious if there's any legal experts that can confirm (or correct) that ...

 

[squealiox]

here's an actual top intl trade economist's take on the toyota decision:

Toyota, Moving Northward
NYTF000020050725e17p00032
Editorial Desk; SECTA
By Paul Krugman
777 Words
25 July 2005
The New York Times
Late Edition - Final
19
English
Copyright 2005 The New York Times Company. All Rights Reserved. 
Modern American politics is dominated by the doctrine that government is the problem, not the solution. In practice, this doctrine translates into policies that make low taxes on the rich the highest priority, even if lack of revenue undermines basic public services. You don't have to be a liberal to realize that this is wrong-headed. Corporate leaders understand quite well that good public services are also good for business. But the political environment is so polarized these days that top executives are often afraid to speak up against conservative dogma.

Instead, they vote with their feet. Which brings us to the story of Toyota's choice.

There has been fierce competition among states hoping to attract a new Toyota assembly plant. Several Southern states reportedly offered financial incentives worth hundreds of millions of dollars.

But last month Toyota decided to put the new plant, which will produce RAV4 mini-S.U.V.'s, in Ontario. Explaining why it passed up financial incentives to choose a U.S. location, the company cited the quality of Ontario's work force.

What made Toyota so sensitive to labor quality issues? Maybe we should discount remarks from the president of the Toronto-based Automotive Parts Manufacturers' Association, who claimed that the educational level in the Southern United States was so low that trainers for Japanese plants in Alabama had to use ''pictorials'' to teach some illiterate workers how to use high-tech equipment.

But there are other reports, some coming from state officials, that confirm his basic point: Japanese auto companies opening plants in the Southern U.S. have been unfavorably surprised by the work force's poor level of training.

There's some bitter irony here for Alabama's governor. Just two years ago voters overwhelmingly rejected his plea for an increase in the state's rock-bottom taxes on the affluent, so that he could afford to improve the state's low-quality education system. Opponents of the tax hike convinced voters that it would cost the state jobs.

But education is only one reason Toyota chose Ontario. Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States.

You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs.

To see why, bear in mind that in the long run decisions like Toyota's probably won't affect the overall number of jobs in either the United States or Canada. But the result of international competition will be to give Canada more jobs in industries like autos, which pay health benefits to their U.S. workers, and fewer jobs in industries that don't provide those benefits. In the U.S. the effect will be just the reverse: fewer jobs with benefits, more jobs without.

So what's the impact on taxpayers? In Canada, there's no impact at all: since all Canadians get government-provided health insurance in any case, the additional auto jobs won't increase government spending.

But U.S. taxpayers will suffer, because the general public ends up picking up much of the cost of health care for workers who don't get insurance through their jobs. Some uninsured workers and their families end up on Medicaid. Others end up depending on emergency rooms, which are heavily subsidized by taxpayers.

Funny, isn't it? Pundits tell us that the welfare state is doomed by globalization, that programs like national health insurance have become unsustainable. But Canada's universal health insurance system is handling international competition just fine. It's our own system, which penalizes companies that treat their workers well, that's in trouble.

I'm sure that some readers will respond to everything I've just said by asking why, if the Canadians are so smart, they aren't richer. But I'll have to leave the issue of America's comparative economic performance for another day.

For now, let me just point out that treating people decently is sometimes a competitive advantage. In America, basic health insurance is a privilege; in Canada, it's a right. And in the auto industry, at least, the good jobs are heading north.

 

[Britney Spears]

recall reading in one of those "Tax Havens for Dummies"-type books that the Federal Government actually has no authority to collect income taxes.  The BNA Act (or whatever) explicitly gives the authority to collect income taxes to the Provincial Governments only, and moreover, that authority is not transferable.  I'm curious if there's any legal experts that can confirm (or correct) that ...

Subsection 91(3) of the Constitution Act, 1867, formerly the British North America Act, 1867 provides the federal goverment with unlimited powers of taxation by permitting "The raising of money by any mode or system of taxation."

http://www.solon.org/Constitutions/Canada/English/ca_1867.html

Good try though.

 

[I_am_John_Galt]

here's an actual top intl trade economist's take on the toyota decision:

"By Paul Krugman"

He ceased to be an Economist (let alone an "actual top intl trade economist," though I'm not really certain what that means) the moment the Democrats lost the White House.

Wait about 3 days and I'm certain there will be around 50 bulletproof rebuttals by economists that don't have vested political interests.  Besides, his argument obscures the issue for cheap political points, though I'm sure HE is aware of that ...

 

[I_am_John_Galt]

Subsection 91(3) of the Constitution Act, 1867, formerly the British North America Act, 1867 provides the federal goverment with unlimited powers of taxation by permitting "The raising of money by any mode or system of taxation."

http://www.solon.org/Constitutions/Canada/English/ca_1867.html

Good try though.

Sorry, I'm typing too fast again!  I meant "...the authority to collect Provincial income taxes to the Provincial Governments only..." (as in the Feds can collect taxes to pay for stuff of federal jurisdiction, but not collect taxes on behalf of the Provinces and transfer it to them.

 

[Britney Spears]

In that case, I refer you to:

- Income Tax Act Section 228: Applying payments under collection agreements.

- Federal Provincial Fiscal Arrangements and federal Post-Secondary Education and Health Contributions Act Part III, Administrative Agreeements

<a href=http://laws.justice.gc.ca/fr/F-8/7513.html#article-7>Which says:</a>

7. (1) The Minister or the Minister of National Revenue, with the approval of the Governor in Council, may on behalf of the Government of Canada enter into an administration agreement with the government of a province or an aboriginal government.

and the Income Tax Act and Financial Administration Acts of your province. For mine (Alberta) you have to pay to see it so I won't bother.

But if you do discover that the existance of the CRA happens to be unconstitutional, do let us know.

 

[Britney Spears]

So if I'm not mistaken, the final juristiction for the enforcement of the Income Tax Act is the RCMP. 

 

[squealiox]

"By Paul Krugman"

He ceased to be an Economist (let alone an "actual top intl trade economist," though I'm not really certain what that means) the moment the Democrats lost the White House.

Wait about 3 days and I'm certain there will be around 50 bulletproof rebuttals by economists that don't have vested political interests.   Besides, his argument obscures the issue for cheap political points, though I'm sure HE is aware of that ...

he's still a working, paper-publishing economist who is regularly cited in peer-reviewed journals and texts. at least his employer, princeton u, seems to think so, as do the countless north american economics faculties that use his latest textbooks as standard texts. his speciality is int'l trade, a subject he certainly knows more about than any of the hack journalists i regularly see trotted out here.
and just what would his "vested interest" be, other than a lack of appropriate deference to the new PC of far-right pseudo-economics?
as for the coming rebuttals, which you appear to take on faith will be "bulletproof", we'll just have to see them first, won't we?

 

[I_am_John_Galt]

Yeah, that's the gist of what I recalled reading: that the Income Tax Act conflicts with the BNA Act, but it hasn't been challenged in the Supreme Court (the RevCan/CCRA people have always backed-down when it got that high).

 

[Britney Spears]

I don't see any conflict between the two acts, since the provinces have presumably entered into agreements with the federal goverment wrt to administration and enforcement of tax collection, so they've handed over the right to do so to the federal goverment. I suppose in theory a province could withdraw from the agreement and establish its own provincial revenue agency.

 

[Jaxson]

i am john galt:

lower training costs/lower health costs by the company all mean the same thing to toyota... More profit, even if we do cost more per hour its still cheaper then america's industry. HURRAY FOR CANADA KEEP THE CONTRACTS COMIN **sorry for the caps**

"But education is only one reason Toyota chose Ontario. Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States.

You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs. "

 

[I_am_John_Galt]

he's still a working, paper-publishing economist who is regularly cited in peer-reviewed journals and texts. at least his employer, princeton u, seems to think so, as do the countless north american economics faculties that use his latest textbooks as standard texts. his speciality is int'l trade, a subject he certainly knows more about than any of the hack journalists i regularly see trotted out here.
and just what would his "vested interest" be, other than a lack of appropriate deference to the new PC of far-right pseudo-economics?
as for the coming rebuttals, which you appear to take on faith will be "bulletproof", we'll just have to see them first, won't we?

Sorry, but ever since his personal little Enron payoff scandal I've been a little wary of his 'analysis': ever see the article he wrote about how soldiers griping about MREs is a clear indication they are unhappy with the (guess who) Bush administration?  A few months ago he did a 180 in columns two weeks apart ... he's got a million of 'em ... a sampling: http://home.pacbell.net/weidners/jottings2/krugman_index.htm

lower training costs/lower health costs by the company all mean the same thing to toyota... More profit, even if we do cost more per hour its still cheaper then america's industry. HURRAY FOR CANADA KEEP THE CONTRACTS COMIN

Sounds good doesn't it?  Would you rather have been working for the last 10 years or find out that you might be able to get a job in 2008?

You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage.  But that's not right, even aside from the fact that Canada's health care system has far lower costs per person than the American system, with its huge administrative expenses. In fact, U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs. "

No one is suggesting that it isn't a marginal benefit for Canada: the point is that it is only a benefit because our economy is worse than that of the US.  Americans with equivalent skills already have jobs ... it is the equivalent of hiring IT people in India: they have tons of supply, while the American supply is already fully utilized.  We are the kids with no shoes in the Nike factory.

P.S> American healthcare per capita is higher than Canada's because they get more of it and the quality is much higher.  They also subsidize the entire world.

 

[mdh]

I'm not even sure what Squeeliox and Zipper are complaining about - really.

If you were a Japanese auto executive wouldn't you invest in Ontario? After all it's so familiar to them - an overtaxed and quiescent electorate, obedient to higher authority, rarely questioning the wisdom of one party rule, satisfied (or self-satisfied) with social and economic mediocrity. 

And the Ontario New Swedish Liberal Party is embarking on one of the biggest big government build ups the province has seen in years, and McGuinty's popularity has been restored. So what's to complain about, really?

The economic consequences are of course a different matter. As Arthur noted, the experience of Europe shows that the burden of social welfare programs is rapidly overwhelming the productivity of Germany and France.

And in case you didn't notice, even the federal Liberal Party has admitted Canada's productivity has seriously fallen behind the US and it's putting together a so-called productivity agenda for the next budget - (which I'm sure will be the usual farce of targetted R&D spending, â Å“Centres of Excellenceâ ? whose boards are larded with Liberal appointments, and all the other apparatus required for an â Å“industrial strategyâ ? of 1970s vintage â “ in other words anything that avoids the real issue.

Cheers, mdh

 

[Britney Spears]

If you were a Japanese auto executive wouldn't you invest in Ontario? After all it's so familiar to them - an overtaxed and quiescent electorate, obedient to higher authority, rarely questioning the wisdom of one party rule, satisfied (or self-satisfied) with social and economic mediocrity.

???

 

[a_majoor]

Some factors which influence Toyota are fairly obvious, such as the lower dollar, close access to the American market and an already existing infrastructure of transportation and suppliers. Other less obvious factors are government subsidized health care, government subsidized education (@70% of tuition costs, hence the "well trained work force"), and the ability to evade import duties through NAFTA. Road and rail links are supplied by the government, and even some companies have benefited from government pork over the years. Attempting to sort this out in dollar amounts would be quite difficult, and perhaps best left as a project for a grad student working for a PHD in economics.

Increasing taxes in a state or province which is suffering from low capital formation is the economic equivalent of squeezing blood from a stone. The practical effect is to drive out "the rich", who have the ability to shelter taxable assets or convert them into movable form and leave, sticking the "poor" with the greater burden. States like Alabama might do a lot better to reform the regulatory environment and look at ways to free the flows of capital inside the state.

The CCRA has agreements with most provinces to collect provincial tax on behalf of the provincial government, currently only Quebec has a separate provincial tax collection agency, with all the extra associated costs that entails. (This would be justifiable if Quebec had a very different system of calculating taxes, like a flat or single tax, but they don't).

The Minister of Revenue and Taxation is the final authority on collecting taxes, but the RCMP provides the ultimate sanction should you choose not to pay up!