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Corporate tax cuts could bring down government

With the NDP apparently determined to vote against the Conservative budget, Parliament returns Monday with the odds now increasingly favouring a general election call in March.

NDP finance critic Tom Mulcair told CTV Question Period Sunday that it was "highly unlikely" his party's caucus would support any budget that did not reverse Prime Minister Stephen Harper's plan to lower the corporate tax rate from 17 per cent to 15 per cent, the final stage of a set of cuts announced in 2007.

"If Mr. Harper's priority is to give more to the banks, he knows what to expect," Mr. Mulcair declared, repeating earlier warnings. NDP MPs, speaking on condition of anonymity, confirmed that many in caucus are strongly inclined to vote against the budget because of the corporate tax cuts, even if Finance Minister Jim Flaherty bows to the party's demands to cut taxes on home heating oil and to improve pension benefits for low-income seniors.

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Both of the national opposition parties believe they have latched onto a potentially game-changing issue. In December, Liberal Leader Michael Ignatieff, who trails the Conservatives in the polls, said eliminating the tax cuts was an essential condition for Liberal support of the budget.

Since then, polls have shown huge public opposition to the tax cuts. A Leger Marketing poll commissioned by QMI News reported Sunday that only one Canadian in 10 favoured lower corporate taxes, while four in 10 wanted to see those taxes go up. About one in four thought the tax rate should stay as it is, and another quarter had no opinion.

Bringing down the government over corporate tax cuts could provide a winning narrative for the Liberals and for the NDP.

Nonetheless, the Conservatives are adamant that the planned tax cuts would go ahead.

"This is fundamental," said Mr. Flaherty on Sunday. "We're going to continue with our low-tax plan compared to their high-tax plan." Mr. Flaherty is expected to announce the budget date as early as Monday. A few days after the budget is unveiled, the House will decide whether the government lives or dies.

Apart from being ideologically committed to increasing productivity and investment through lower corporate taxes, the Conservatives may be calculating that their supporters, about one in three voters, either endorse the cuts or at the least won't vote against the party because of them, leaving the Liberals and NDP to carve up the anti-tax-cut vote, along with the Bloc Québécois in Quebec.

Nonetheless, Mr. Flaherty and Mr. Harper may still be able to survive the budget vote if they offer the NDP enough concessions that the party feels it must swallow the tax cuts in order to claim credit on other fronts.

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NDP strategists said Leader Jack Layton would continue to push for a budget accord with the Conservatives, if only because it would help keep the spotlight on the party and its leader.

The Bloc's demand that Ottawa target $5-billion in new spending for Quebec is so over the top that observers have written off the possibility of a Bloc-Conservative deal.

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About the Author

John Ibbitson started at The Globe in 1999 and has been Queen's Park columnist and Ottawa political affairs correspondent.Most recently, he was a correspondent and columnist in Washington, where he wrote Open and Shut: Why America has Barack Obama and Canada has Stephen Harper. He returned to Ottawa as bureau chief in 2009. More

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