Mr. Speaker, the poet Robert Louis Stevenson once wrote that, “We are all travelers in the wilderness of the world, and the best that we can find in our travels is an honest friend”.
An honest friend does not tell us what we want to hear, but what we need to hear. The truth is that Ontario is facing some major challenges.
The combined forces of global economic volatility, a U.S. economy showing ever-increasing strains, a weakening U.S. dollar, a dramatically higher Canadian dollar, along with fierce competition from emerging markets like China and India, and high energy prices are hurting important sectors of Ontario's economy.
Even as Canada's overall economic fundamentals remain solid, our national economic engine is in danger of stalling.
While Canada experiences the second longest period of economic expansion in our history, Ontario's share of the national nominal GDP has actually fallen from 41.4% in 2002 to 38.6% in 2006.
While Canadian business investment has expanded for 12 consecutive years, Ontario's economic growth has fallen below the national average recently due to weaker growth in exports and business investment.
While Canada's national unemployment rate is at its lowest level in 33 years with more Canadians working than ever before, for the first time ever Ontario's unemployment rate was above the national average in 2007.
While Canada is on the best fiscal footing of the major western industrialized countries and is the only member of the G-7 with both ongoing budget surpluses and a falling debt burden, Ontario struggles ranking 15th out of 16 in GDP per capita growth when compared to the most populous provinces and U.S. states in North America.
The facts are clear. Ontario's economy is losing ground to the rest of Canada. As Ontario's economy loses ground, the province moves closer and closer to falling below the equalization standard that determines have and have not provinces in Confederation.
This trend is troubling. In 2005-06, Ontario was around $400 above the standard. In 2006-07, $300 above. In 2007-08, $250 above. In 2008-09, only $85 above the standard. If this decline continues, Ontario will, for the first time in the history of the program, receive equalization payments.
Economists such as Don Drummond of TD Bank Financial and Dale Orr of Global Insight are now suggesting this is a distinct possibility. Should that occur it would have serious ramifications for all of Canada and its equalization framework. But the real concerns are the faces behind all of these facts and figures, the people who own Ontario's businesses, and the workers and families that they employ.
We know what prolonged economic weakness may mean to them. It may mean that businesses will not need as many employees, cutting a shift or laying off some employees, or even worse, it may mean businesses closing altogether. Ensuring the province's long term prosperity is what has motivated our concern about Ontario's economic vitality.
As Canada's finance minister, when Ontario's economy lags, I am compelled to react, not simply because of the possible ramifications on the federal equalization system but because the province is simply too important to Canada's economy.
While we cannot do anything about the rising price of oil or the weak U.S. dollar, action can be taken to create a business climate where innovators, entrepreneurs and risk takers can flourish. Ontario can no longer rely on a low Canadian dollar to give our industry a discount over international markets.
More than ever, we need to upgrade our manufacturing plants, equipment and public infrastructure as we work to close our productivity gap with the United States.
Our Conservative government is taking action in response through our long term economic plan “Advantage Canada”. We are making a historic $33 billion investment in infrastructure along with significant investments in education and research.
We are supporting communities affected by major economic downturns through a $1 billion community development trust, a $250 million automotive innovation fund, and an accelerated capital cost allowance for the manufacturing and processing sector.
We are providing historic tax relief. We are cutting taxes in every way the federal government collects them: personal, consumption, business and excise taxes. We have reduced the overall tax burden to its lowest level in nearly 50 years. Since coming to office we have reduced the overall tax burden by nearly $200 billion.
In anticipation of increased economic volatility, we took decisive and aggressive action in our fall 2007 economic statement by providing $60 billion in broad-based tax relief to stimulate the Canadian economy.
Indeed, the actions this Conservative government has taken since 2006 will provide $21 billion in incremental tax relief, which is equivalent to 1.4% of Canada's economy, to Canadians and Canadian businesses this year.
Our low business taxes will be a powerful brand for Canada globally. That is why our government has cut business taxes deeper and faster than ever contemplated before, including reducing corporate taxes to 15% by 2012, eliminating the federal capital tax, eliminating the corporate surtax in 2008, providing tax relief to our manufacturing sector, and providing incentives to the provinces to eliminate their capital taxes.
As a result of our actions Canada's corporate taxes will become among the lowest in major industrialized economies.
As an international KPMG study release last week indicated, these business tax reductions have been instrumental in helping Canadian industry adjust to the rise in the Canadian dollar. But we cannot do it alone. We need the provincial governments to step up to the plate and follow suit.
As the Canadian Council of Chief Executives has recently stated:
The federal government clearly has done everything it can to reduce tax rates within the boundaries of prudent fiscal management. The next major steps in forging a more competitive corporate tax system must come at the provincial level.
This is especially true of Ontario. A growing chorus of voices have been calling for the province to lower its excessively high business taxes. Business taxes in Ontario are currently the highest in Canada. If no action is taken, Ontario's marginal effective tax rate, the overall tax rate on new business investment, will be 30.7% in 2012 compared to only 18.8% in Quebec.
We are not the only ones saying this. This is being echoed by leading economists in Canada. In fact, it is echoed by the Ontario government's own task force on competitiveness which said:
Ontario’s tax regime is one of the least conducive to business investment in the developed world.
We are asking all provinces, not only Ontario, to recognize the long term benefits of tax relief. We cut taxes to attract investment, to create jobs, and to help sharpens Canada's competitive edge internationally.
Even the federal leader of the Liberal Party understands that saying, “A lower corporate tax rate is a powerful weapon...to generate more investment, higher living standards and better jobs”.
We applaud the governments of Manitoba, British Columbia, Quebec, Saskatchewan and New Brunswick for their recent efforts to lower taxes.
We set out three requests to the Government of Ontario: lower the business taxes overall, move toward harmonization of PST and GST, and eliminate the capital taxes with respect to which we provided an incentive.
I applaud Ontario for taking advantage of the incentive with respect to capital taxes which is a step forward that will fully eliminate the provincial capital taxes in Ontario in 2010, but there is much more to be done on the overall business tax rate in Ontario and particularly with respect to the harmonization issue for the benefit of businesses, small, medium and large, in Ontario.
Again, we stand ready and willing, in the spirit of open federalism, to work with Ontario and all provinces and territories to build a more efficient, more prosperous and wealthier economic union for all Canadians.